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

See all articles by Hanna Halaburda

Hanna Halaburda

Bank of Canada; New York University (NYU); CESifo (Center for Economic Studies and Ifo Institute)

Yaron Yehezkel

Coller School of Management , Tel-Aviv University

Multiple version iconThere are 2 versions of this paper

Date Written: July 17, 2018

Abstract

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

Halaburda, Hanna and Yehezkel, Yaron, Focality Advantage in Platform Competition (July 17, 2018). Journal of Economics & Management Strategy (2019), Vol. 28, Pages 49-59. Available at SSRN: https://ssrn.com/abstract=3305370 or http://dx.doi.org/10.2139/ssrn.3305370

Hanna Halaburda (Contact Author)

Bank of Canada ( email )

234 Wellington Street
Ontario, Ottawa K1A 0G9
Canada

New York University (NYU) ( email )

Bobst Library, E-resource Acquisitions
20 Cooper Square 3rd Floor
New York, NY 10003-711
United States

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Munich
Germany

Yaron Yehezkel

Coller School of Management , Tel-Aviv University ( email )

Ramat Aviv
Tel Aviv, 69978
Israel

HOME PAGE: http://www.tau.ac.il/~yehezkel/

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