Hanna W. Halaburda Articles — HBS Working Knowledge

Platform Competition Under Partial Belief Advantage

Authors:	Hanna Halaburda and Yaron Yehezkel
Published:	February 16, 2012
Paper Release Date:	February 2012
Feature:	Working Papers

In platform competition in a two-sided market, a platform's ability to attract consumers depends not only on the consumers' beliefs regarding its quality, but also on consumers' beliefs regarding the platform's ability to attract the other side of the market. For example, in the market for smart-phones the recent introductions of Apple's iPhone 4S with the improved operating system, and Samsung's Galaxy II with the improved Android 4, open a new round in the competition between the two platforms. The ability of each platform to attract users depends not only on its perceived quality, but also on users' beliefs regarding the number new applications developed for the platform. Likewise, the ability to attract application developers to the platform depends on their beliefs regarding the number of users that will join the platform. In a competitive market, some platforms may enjoy more favorable beliefs of the market (about their ability to attract ``the other side) than other platforms. Such a belief advantage may be source of a competitive advantage. In this paper, the authors look at how the belief advantage helps the platform to compete in the market, and also how a platform may create the belief advantage. The authors find that the degree of the platform's belief advantage affects its decision regarding its business model (whether to subsidize buyers or sellers), as well as the access fees and the size of the platform. Moreover, the paper looks into the optimal advertising strategy that leads to creating belief advantage. This paper contributes to scholarship on economics and business strategy.

Expectations, Network Effects and Platform Pricing

Authors:	Andrei Hagiu and Hanna Hałaburda
Published:	January 17, 2012
Paper Release Date:	December 2011
Feature:	Working Papers

In markets with network effects, the value that users gain from platforms depends on the number of other users of the same type who join the same platform (direct network effects) or the number of users of a different type that join (cross-group network effects). Examples include social networks like Facebook or Google+, payment systems like PayPal or Visa, videogame systems like PlayStation 3 and Xbox 360, smartphone platforms like Apple's iPhone or Google's Android, etc. Users typically rely on the media, market reports, or word of mouth to form expectations about the total number of other users that join a given platform. However, most of the time these users are unable to calculate the effect of platforms' prices on adoption by other users. In other words, they do not take price into account when forming expectations. To analyze platform profits, Andrei Hagiu and Hanna Hałaburda model different degrees of user sophistication in forming price expectations in markets with network effects. They show that firms have different preferences regarding the average sophistication of their user base depending on market structure.

Better-reply Dynamics in Deferred Acceptance Games

Authors:	Guillaume Haeringer and Hanna Halaburda
Published:	June 29, 2011
Paper Release Date:	June 2011
Feature:	Working Papers

There's an inherent problem in the market design theory known as mechanism design, in that the players in the market may not understand the design, and thus may make bad choices until they learn to work the system better. This paper explores the issue of learning the design. It focuses on a particular mechanism, the Deferred Acceptance algorithm for two-sided matching markets, which is used in many real-life markets. Research was conducted by Guillaume Haeringer of Universitat Autonoma de Barcelona and Hanna Halaburda of Harvard Business School.

When Smaller Menus are Better: Variability in Menu-Setting Ability and 401(k) Plans

Authors:	David Goldreich and Hanna Halaburda
Published:	April 28, 2011
Paper Release Date:	February 2011 (Revised December 2011)
Feature:	Working Papers

Economists love menus, which can be used to help understand people's choices. For example, do we prefer more choices (larger menu) or fewer (shorter menu)? But the menu itself has to be pre-selected. Research by David Goldreich (Rotman School of Management, University of Toronto) and Hanna Halaburda (Harvard Business School) focuses on the menu setter's decisions about what to include, and how large a menu to construct in the context of 401(k) plan choices.

Platform Competition under Asymmetric Information

Authors:	Hanna Halaburda and Yaron Yehezkel
Published:	March 22, 2011
Paper Release Date:	February 2011
Feature:	Working Papers

Research by Hanna Halaburda (Harvard Business School) and Yaron Yehezkel (Tel Aviv University) shows how pricing, profits, and market efficiency are affected in two-sided markets, such as with smartphone and video game platforms, when users and developers do not know the utility or costs associated with the platform until they join.

When Does a Platform Create Value by Limiting Choice?

Authors:	Ramon Casadesus-Masanell and Hanna W. Halaburda
Published:	October 26, 2010
Paper Release Date:	September, 2010 (Revised January, 2011)
Feature:	Working Papers

Platforms such as video games and smartphones need to attract users, and the best way to do so is to offer more and more applications. Is there ever a point where a platform should limit the variety available? Researchers Ramon Casadesus-Masanell and Hanna Halaburda observe that in many situations users enjoy consuming applications together. When such consumption complementarities are present, users may benefit if the platform limits choice. With fewer applications to choose from, it is easier for users to take full advantage from shared consumption.

Platforms and Limits to Network Effects

Authors:	Hanna Halaburda and Mikolaj Jan Piskorski
Published:	June 3, 2010
Paper Release Date:	May 2010 (revised June 2010)
Feature:	Working Papers

Why do platforms that restrict choice and charge higher prices seem to prosper alongside platforms offering cheap or free unlimited choice? In the online dating market, for example, eHarmony deliberately limits the number of candidates available to its customers. Headhunters show only a few candidates to the companies, and even fewer companies to the candidates. In the housing market, brokers limit the number of houses they show to potential buyers and sellers. In this paper, HBS professors Hanna Halaburda and Mikolaj Jan Piskorski challenge conventional understanding of platform competition and network effects by describing a two-sided matching environment and studying the indirect network effects in this environment. They show that the interplay between more choice and more competition influences the strength of network effects and attractiveness of a platform. Some agents may opt for a platform with few choices to avoid higher levels of competition. The researchers' model helps explain why platforms that limit their choice set coexist (and thrive) alongside platforms that offer greater choice.

Unravelling in Two-Sided Matching Markets and Similarity of Preferences

Author:	Hanna Halaburda
Published:	February 4, 2009
Paper Release Date:	November 2008
Feature:	Working Papers

Hiring policy is one of the most important determinants of a firm's success. The hiring process calls for collecting information in order to choose the best individual from among the candidates. In certain markets, however, firms hire workers long before all the pertinent information is available. Those early matches often turn out to be inefficient when the job starts. This phenomenon of contracting long before the job begins, and before relevant information is available, is called unravelling. Unravelling has been recognized as a serious problem in numerous markets, and measures designed to preclude it (such as centralized clearinghouses and enforcement of uniform hiring) have not always been successful. In order to provide insights for designing better measures to prevent unravelling in markets prone to it, this paper examines a two-sided matching market populated by firms on one side and workers on the other.