The Gang of Four: Acquaintances, Friends or Foes? Towards an Integrated Perspective on Platform Competition

34 Pages Posted: 15 May 2013

See all articles by Ivanka Visnjic

Ivanka Visnjic

ESADE Business School; University of Cambridge

Carmelo Cennamo

Copenhagen Business School - Department of Strategy and Innovation; SDA Bocconi

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Date Written: May 14, 2013

Abstract

The economics literature extensively focused on pricing and openness as key strategic choices of platforms in two-sided markets, with the ultimate goal to obtain network effects and win over direct competitors within the boundaries of a single market. We argue that, due to the business model innovations, such as platform envelopment, the platform competition today grows beyond the boundaries of a single market. To theoretically derive the competition implications of these business model innovations, we use the lens of the multi-market contact theory. Our study argues that platform competition unfolds in two distinct, though interdependent stages. At first, platform owners make business model choices aimed at attainment of network effects and enhanced user experience within a single market. At the second stage, platforms expand from their core by enveloping into neighboring platform markets, seeking to further enhance user-experience through cross-platform complementarities. Platform envelopment is likely to coincide or lead to envelopment by the platform firm in the neighboring market; these parallel envelopments lead to convergence of neighboring markets and emergence of supra-platform market, where diverse platform players co-habitate: compete, collaborate and engage in business model innovation.

Keywords: platforms, two-sided markets, competition, business models

JEL Classification: O32

Suggested Citation

Visnjic, Ivanka and Cennamo, Carmelo, The Gang of Four: Acquaintances, Friends or Foes? Towards an Integrated Perspective on Platform Competition (May 14, 2013). ESADE Business School Research Paper No. 245. Available at SSRN: https://ssrn.com/abstract=2264869 or http://dx.doi.org/10.2139/ssrn.2264869

Ivanka Visnjic (Contact Author)

ESADE Business School ( email )

Avda. de Pedralbes 60-62
Barcelona, 08034
Spain

University of Cambridge ( email )

Trinity Ln
Cambridge, CB2 1TN
United Kingdom

Carmelo Cennamo

Copenhagen Business School - Department of Strategy and Innovation ( email )

Kilen
Frederiksberg, 2000
Denmark

HOME PAGE: http://www.cbs.dk/en/staff/ccesi

SDA Bocconi ( email )

Via Bocconi 8
Milan, MI 20136
Italy

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