Tuesday, August 17, 2010
Posted by D. Daniel Sokol
Pai-Ling Yin (MIT Sloan) discusses A Tale of Two Games: Membership Versus Usage in Platform Competition.
ABSTRACT: Demand in platform competition is characterized by a 2-stage game: first, demanders decide whether to adopt a platform, and THEN they decide how much to use the platform. However, with the exception of Bedre & Calvano (2010) and Estelle & Yin (2008), the distinction between membership demand and demand for usage is typically ignored. Consumers are assumed to make their membership choice only after considering usage. If membership and usage are perfectly correlated and simultaneous, there is no loss from simply treating membership and usage as the same or ignoring membership altogether. However, this article will illuminate the ways in which membership is distinct from usage, leading to important strategic and policy implications from distinguishing between membership and usage in platform competition.