Co-existing Platforms in Multi-Layer Network Formation

Abstract

We study a model of non-cooperative multi-layer network formation where players have to choose among two platforms (layers) but may-at an additional cost-also use both. Players may only form costly links to other players who are on the same platform as they are. The presence of links allows players to access non-rival benefits such as information. We employ this model to study conditions under which multiple platforms may co-exist and study the implications for the resulting network. We argue that coexistence can occur if some players find it worthwhile to use multiple platforms and relay benefits to those who only use one. We further study a noisy myopic best-response process to emphasize that coexistence may also persist in the long run. We explore several extensions such as frictions in information transmission and heterogeneous preferences.

Keywords: Network formation, multi-layer network, coordination