Abstract
We study incumbency advantage in markets with positive consumption externalities. Users of an incumbent platform receive sto- chastic opportunities to migrate to an entrant and can either accept them or wait for a future opportunity. In some circumstances, users have incentives to delay migration until others have migrated. If they all do so, no migration takes place, even when migration would have been Pareto-superior. We use our framework to identify environments where incumbency advantage is larger. A key result is that having more migration opportunities actually increases incumbency advantage.
Keywords
Platform; Migration; Standardization and Compatibility; Industry Dynamics;
JEL codes
- D85: Network Formation and Analysis: Theory
- L14: Transactional Relationships • Contracts and Reputation • Networks
- R23: Regional Migration • Regional Labor Markets • Population • Neighborhood Characteristics
- L15: Information and Product Quality • Standardization and Compatibility
- L16: Industrial Organization and Macroeconomics: Industrial Structure and Structural Change • Industrial Price Indices
Replaces
Gary Biglaiser, Jacques Crémer, and André Veiga, “Should I stay or should I go? Migrating away from an incumbent platform”, TSE Working Paper, n. 21-1281, December 2021.
Reference
Jacques Crémer, Gary Biglaiser, and André Veiga, “Should I stay or should I go? Migrating away from an incumbent platform”, The RAND Journal of Economics, vol. 53, n. 3, August 2022, pp. 453–483.
See also
Published in
The RAND Journal of Economics, vol. 53, n. 3, August 2022, pp. 453–483