The Effects Network Externalities on Platform Value and Management: Evidence from Internet Poker Users

34 Pages Posted: 27 Aug 2018

See all articles by Bradley S. Wimmer

Bradley S. Wimmer

University of Nevada, Las Vegas - College of Business - Department of Economics

Kahlil S. Philander

Washington State University - College of Business and Economics

Malissa Redona

University of Nevada, Las Vegas - College of Business

Date Written: August 16, 2018

Abstract

This study tests network theory using data from internet poker users, a platform-based business. The study demonstrates the existence of network effects but also limits to scale. The composition of user types on the network is found to significantly affect value, and that value varies by user type. Users with value-appropriating capabilities are shown to extract higher returns from the network. The findings suggest that platform-based businesses need to manage both the size of their network and the relative composition of users. They must also consider the external effects, both positive and negative, users from different groups impose on the value others receive from networks. These findings contribute to a limited body of empirical evidence evaluating theory associated with business strategies in platform-based businesses.

Keywords: network effects; platform businesses; value-appropriating capabilities; opportunistic behavior

JEL Classification: D85; L83

Suggested Citation

Wimmer, Bradley S. and Philander, Kahlil S. and Redona, Malissa, The Effects Network Externalities on Platform Value and Management: Evidence from Internet Poker Users (August 16, 2018). Available at SSRN: https://ssrn.com/abstract=3233040 or http://dx.doi.org/10.2139/ssrn.3233040

Bradley S. Wimmer

University of Nevada, Las Vegas - College of Business - Department of Economics ( email )

4505 S. Maryland Parkway
Las Vegas, NV 89154
United States

Kahlil S. Philander (Contact Author)

Washington State University - College of Business and Economics ( email )

PO Box 644750
Pullman, 99164-4750
United States

Malissa Redona

University of Nevada, Las Vegas - College of Business ( email )

United States

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