Working Paper: CEPR ID: DP14496
Authors: Gary Biglaiser; Jacques Crémieux; André Veiga
Abstract: We study incumbency advantage in markets with positive consumption externalities. Users of an incumbent platform receive stochastic 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 havebeen Pareto-superior. We use our framework to identify environments where incumbency advantage is larger. A key result is that havingmore migration opportunities actually increases incumbency advantage.
Keywords: platform migration; standardization and compatibility; industry dynamics
JEL Codes: D85; L14; R23; L15; L16
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| more migration opportunities (J61) | incumbency advantage (D72) |
| migration technology influences migration decisions (J61) | incumbency advantage (D72) |