A Study On The Network Externality And The Market Entry Of Platform In Two-Sided Markerts:Simulation Experiment And Realistic Basis

There's a clear tendency that the internet-based platform with large number of users has kept entering other markets,which seems confirming the rule of"winner-takes-all" in two-sided markets,but the results after the entry differs greatly.Based on the analysis of social network and mobile payment platform,the paper studies the dynamic process of the dominant platform entering into a new market focusing on the efforts of direct,cross-group network externalities and users of installed-base respectively,and conduct an Agent-Based Model simulation experiment,as well as measuring the role of uses of installed-base and network effects in market entry.From the perspective of market entry,the huge users of installed-base already possessed by the platforms is equivalent to the number of users in the new market that exceeds the critical mass,which can greatly reduce the barriers to entry barriers caused by the users of installed-base.However,the critical mass is not a panacea in the two-sided markets.The larger network mass is not a sufficient condition for the platforms to successfully enter other markets.Simply migrating the number of large users and ignoring the direct network externalities among the users does not help the platforms with the successful entry of platforms into the network-based markets.Technical progress has resulted in the rapid development of the mobile Internet industry.The understanding and judgment of platforms' behavior and market competition also need to be adjusted in a timely manner.If one side of the market has strong direct network externalities,it should increase the importance of this number of users in the market share considerations.In the early stages of the development of the platforms,they will face the problem of "chicken and egg",and it is difficult to make correct decisions when choosing which side to preferentially attract users to join the platform.This article summarizes a new entry strategy in the two-sided markets.Existing users with strong direct network externalities can directly translate into users of installed-base in the new markets,and then expand the scale of the same sided users through direct network externalities and attracts users on the other side by the cross externality of the network.The direct network externality between users can be used as a decision-making basis for the platforms to solve the problem of "chicken and egg".The users of installed-base is the prerequisite for the survival of the platforms,and it is a necessary condition for development.Therefore,the importance of the number of users for the platforms in the early stage of development far exceeds the income and profits.In this period,the platforms usually take the form of free or even subsidies in order to attract users,and users will be charged after the critical mass is achieved to gain profits.Through theoretical analysis and simulation experiments,this paper theoretically verifies the existence of the critical mass,and at the same time measures the specific value of critical mass of the required consumers for platforms successfully entering under different initial merchant size conditions.It provides evidence for the core concepts in two-sided platform markets theory,and also provides a basis for judging the legitimacy of platforms' competitive behavior.The rationality of platforms behavior to obtain user in a free or subsidized manner should be limited to the stages after achieving critical mass.The rationality of such behavior should be questioned after achieving the critical mass,that is possibly predatory pricing or unfair competition in order to exclude competitors.