Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Working Knowledge
Business Research for Business Leaders
  • Browse All Articles
  • Popular Articles
  • Cold Call Podcast
  • Managing the Future of Work Podcast
  • About Us
  • Book
  • Leadership
  • Marketing
  • Finance
  • Management
  • Entrepreneurship
  • All Topics...
  • Topics
    • COVID-19
    • Entrepreneurship
    • Finance
    • Gender
    • Globalization
    • Leadership
    • Management
    • Negotiation
    • Social Enterprise
    • Strategy
  • Sections
    • Book
    • Podcasts
    • HBS Case
    • In Practice
    • Lessons from the Classroom
    • Op-Ed
    • Research & Ideas
    • Research Event
    • Sharpening Your Skills
    • What Do You Think?
    • Working Paper Summaries
  • Browse All
    Platform Competition Under Partial Belief Advantage
    16 Feb 2012Working Paper Summaries

    Platform Competition Under Partial Belief Advantage

    by Hanna Halaburda and Yaron Yehezkel
    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. Key concepts include:
    • The advantaged platform can win the market even if it offers a lower quality than the disadvantaged platform, because of its ability to exploit its beliefs advantage.
    • It is also possible for the disadvantaged platform to win if it offers substantially higher quality.
    LinkedIn
    Email

    Author Abstract

    This paper considers platform competition in a two-sided market that includes buyers and sellers. One of the platforms benefits from a partial belief advantage, in that each side believes that it is more likely that the other side will join the advantaged platform. We find that the degree of the platform's belief advantage affects its decision regarding the business model (i.e., whether to subsidize buyers or sellers), the access fees and the size of the platform. A slight increase in the platform's belief advantage may induce the advantaged platform to switch from subsidizing sellers to subsidizing buyers, or induce the disadvantaged platform to switch from subsidizing buyers to subsidizing sellers.

    Paper Information

    • Full Working Paper Text
    • Working Paper Publication Date: February 2012
    • HBS Working Paper Number: 12-066
    • Faculty Unit(s): Strategy
      Trending
        • 25 Jan 2022
        • Research & Ideas

        More Proof That Money Can Buy Happiness (or a Life with Less Stress)

        • 25 Feb 2019
        • Research & Ideas

        How Gender Stereotypes Kill a Woman’s Self-Confidence

        • 14 Mar 2023
        • In Practice

        What Does the Failure of Silicon Valley Bank Say About the State of Finance?

        • 15 Nov 2022
        • Book

        Stop Ignoring Bad Behavior: 6 Tips for Better Ethics at Work

        • 17 May 2017
        • Research & Ideas

        Minorities Who 'Whiten' Job Resumes Get More Interviews

    Find Related Articles
    • Technology Adoption
    • Corporate Strategy
    • Consumer Products

    Sign up for our weekly newsletter

    Interested in improving your business? Learn about fresh research and ideas from Harvard Business School faculty.
    This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
    ǁ
    Campus Map
    Harvard Business School Working Knowledge
    Baker Library | Bloomberg Center
    Soldiers Field
    Boston, MA 02163
    Email: Editor-in-Chief
    →Map & Directions
    →More Contact Information
    • Make a Gift
    • Site Map
    • Jobs
    • Harvard University
    • Trademarks
    • Policies
    • Accessibility
    • Digital Accessibility
    Copyright © President & Fellows of Harvard College