Tuesday, September 30, 2014

Unpaid Crowd Complementors: The Platform Network Effect Mirage

Kevin J. Boudreau, London Business School and Lars Bo Jeppesen, Bocconi University describe Unpaid Crowd Complementors: The Platform Network Effect Mirage.

ABSTRACT: Platforms have evolved beyond just being organized as multi-sided markets with complementors selling to users. Complementors are often unpaid, working outside of a price system and driven by heterogeneous sources of motivation — which should affect how they respond to platform growth. Does reliance on network effects and strategies to attract large numbers of complementors remain advisable in such contexts? We test hypotheses related to these issues using data from 85 online multi-player game platforms with unpaid complementors. We find that complementor development responds to platform growth even without sales incentives, but that attracting complementors has a net zero effect on on-going development and fails to stimulate network effects. We discuss conditions under which a strategy of using unpaid crowd complementors remains advantageous.

https://lawprofessors.typepad.com/antitrustprof_blog/2014/09/unpaid-crowd-complementors-the-platform-network-effect-mirage.html

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