Focality Advantage in Platform Competition
Journal of Economics & Management Strategy (2019), Vol. 28, Pages 49-59
19 Pages Posted: 6 Jan 2019 Last revised: 19 Jun 2019
Date Written: July 17, 2018
We consider a methodology for studying how beliefs shape platform competition, based on the notion of a partial focality. The concept of focality is useful for modeling platform competition when the presence of network effects results in multiple equilibria for a certain set of prices. We illustrate how to implement this methodology in both static and dynamic competition between platforms that differ in their basic quality. The initial degree of focality affects the ability of the high-quality platform to win the market. Yet, dynamic considerations may have positive or negative effect on this ability.
Keywords: Platform Competition, Network Effects, Focality, Coordination Game
JEL Classification: L41, L42, K21, D8
Suggested Citation: Suggested Citation