Multihoming in two-sided markets: An empirical inquiry in the video game console industry

Vardit Landsman*, Stefan Stremersch

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract

Two-sided markets are composed of platform owners and two distinct user networks that either buy or sell applications for the platform. The authors focus on multihoming-the choice of an agent in a user network to use more than one platform. In the context of the video game console industry, they examine the conditions affecting seller-level multihoming decisions on a given platform. Furthermore, they investigate how platform-level multihoming of applications affects the sales of the platform. The authors show that increased platform-level multihoming of applications hurts platform sales, a finding consistent with literature on brand differentiation, but they also show that this effect vanishes as platforms mature or gain market share. The authors find that platform-level multihoming of applications affects platform sales more strongly than the number of applications. Furthermore, among mature platforms, an increasing market share leads to more seller-level multihoming, while among nascent platforms, seller-level multihoming decreases as platform market share increases. These findings prompt scholars to look beyond network size in analyzing two-sided markets and provide guidance to both (application) sellers and platform owners.

Original languageEnglish
Pages (from-to)39-54
Number of pages16
JournalJournal of Marketing
Volume75
Issue number6
DOIs
StatePublished - Nov 2011

Keywords

  • Entertainment markets
  • Indirect network effects
  • Multihoming
  • Two-sided markets
  • Video game industry

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