Dynamic network platform competition in two-sided markets

In this dissertation, I study the long-term growth dynamics of independent and competing network platforms in two-sided markets using dynamic system and differential games approaches. In a two-sided market, two groups of agents interact with each other via a common network platform and the value of participating in the network for agents in one group depends on the number of participants from the other group. Examples of two-sided markets include credit card networks, PC operating systems, yellow directory, etc.; For independent two-sided networks, I study how the interaction between cross-group and within-group network effects changes network growth dynamics. In particular, I identify conditions under which a network can overcome the so-called "chicken-and-egg" problem and achieve sustainable growth. Managerial insights are drawn from the dynamic system models to help two-sided networks to overcome the "chicken-and-egg" problem.; For competing two-sided networks, I study under what conditions competing networks can co-exist. I examine the long-term market shares of competing networks under three different scenarios: both sides of the market single-home (i.e. each individual agent joins only one network, though different individuals may join different networks), both sides multi-home (i.e. each individual agent can join multiple networks) and one side single-homes and the other multi-homes. Both the dynamic system models and the differential games model suggest only one network is likely to thrive under the scenario where either or both sides of the market single-home. When both sides are allowed to multi-home, competing networks may co-exist and divide the market share among them. The results mirror realities in many two-sided markets.; I also relate the findings to the resource-based view of competitive advantage (RBV). The resource accumulation process in two-sided markets is shown to satisfy the five characteristics of asset-stock accumulation summarized by Dierickx and Cool (1989). The value of the resources also differs in single-homing vs. multi-homing markets, reflecting the importance of bringing market context into the RBV framework. Finally, I synthesize major findings of the dissertation into various strategy recommendations for two-sided networks.