Working Paper: NBER ID: w24512
Authors: Kevin J. Boudreau
Abstract: Platforms often have “crowds” of amateurs working on them as complementors, in other cases professional entrepreneurs—or both. What can a platform owner do to implement these outcomes? I document evidence on mobile app developers showing that just small, incremental changes in platform design—related to the bare minimum costs required to build an app and factors affecting non-pecuniary payoffs—can lead the “bottom-to-fall-out” of the market to amateurs. Where the bottom-falls-out, there is a flood of lowest-quality developers who nonetheless are long-lived on the platform and engage in relatively high development activity. I find no evidence that amateurs crowd-out development activity of top developers in this context. Moreover, the bottom-falling-out is associated with the generation of significantly greater numbers of highest-quality products. I discuss several interpretations.
Keywords: platforms; amateurs; professional entrepreneurs; complementors; mobile apps
JEL Codes: D04; E26; J4; L1; L8; O3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| small incremental changes in platform design related to development costs (O00) | bottom falling out of the market to amateurs (E32) |
| minimum development costs decrease sufficiently (O22) | number of amateur developers significantly increases (Z20) |
| influx of amateur developers (O36) | greater number of high-quality products being generated (L15) |
| bottom falling out of the market to amateurs (E32) | number of amateur developers significantly increases (Z20) |