Friends in High Places: Heterogeneity in On-Platform Demand Spillovers

Abstract

In this project, I explore heterogeneity in inter-provider demand spillovers on a digital platform. In a study of the Spotify streaming platform, I argue and then demonstrate that the size of the demand spillover experienced by a focal provider following peer activity on a digital platform depends on: a) the attention brought to the platform by peer activity; b) the likelihood of attention transfer; and c) the benefits of consumer learning for the focal provider. Critically, these dynamics have implications for provider strategy. On Spotify, providers benefit from releasing an album at the same time as a high performing peer to take advantage of the demand spillovers such peers create. Through this research, I provide insight into competitive interactions between providers on digital platforms.

Keywords: platforms, competition, spillovers, digital markets, agglomeration