Group Hug: Platform Competition with User Groups

Sarit Markovich*, Yaron Yehezkel

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract

We consider platform competition for small users and a user group. One platform enjoys a quality advantage and the other benefits from favorable beliefs. We study whether the group mitigates the users’ coordination problem—i.e., joining a low-quality platform because they believe that other users would do the same. We find that a group that can facilitate coordination on the high-quality platform may choose to maintain the dominance of the low-quality one. Users’ utility is non-monotonic in the proportion of the group. Finally, we highlight factors that motivate the group to help the high-quality platform to win the market

Original languageEnglish (US)
Pages (from-to)139-175
Number of pages37
JournalAmerican Economic Journal: Microeconomics
Volume14
Issue number2
DOIs
StatePublished - 2022

ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)

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