%S TSE Working Paper
%A Hanna Halaburda
%A Bruno Jullien
%A Yaron Yehezkel
%T Dynamic competition with network externalities: why history matters
%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.
%K network externalities
%K dynamic competition
%K coordination
%B TSE Working Paper
%V 16-636
%D 2016
%C Toulouse
%I TSE Working Paper
%L publications20417