%0 Report
%9 Working Paper
%A Halaburda, Hanna
%A Jullien, Bruno
%A Yehezkel, Yaron
%B TSE Working Paper
%C Toulouse
%D 2016
%F publications:20417
%I Université Toulouse 1 Capitole
%K network externalities
%K dynamic competition
%K coordination
%T Dynamic competition with network externalities: why history matters
%U https://publications.ut-capitole.fr/id/eprint/20417/
%V 16-636
%X We consider dynamic competition among platforms in a market with network  externalities. A platform that dominated the market in the previous period be-  comes \focal" in the current period, in that agents play the equilibrium in which  they join the focal platform whenever such equilibrium exists. Yet when faced  with higher-quality competition, can a low-quality platform remain focal? In the  nite-horizon case, the unique equilibrium is ecient for \patient" platforms;  with an innite time horizon, however, there are multiple equilibria where ei-  ther the low- or high-quality platform dominates. If qualities are stochastic,  the platform with a better average quality wins with a higher probability, even  when its realized quality is lower, and this probability increases as platforms  become more patient. Hence social welfare may decline as platforms become  more forward looking.