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Should I stay or should I go? Migrating away from an incumbent platform
Author(s) -
Biglaiser Gary,
Crémer Jacques,
Veiga André
Publication year - 2022
Publication title -
the rand journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 3.687
H-Index - 108
eISSN - 1756-2171
pISSN - 0741-6261
DOI - 10.1111/1756-2171.12418
Subject(s) - externality , incentive , pareto principle , consumption (sociology) , network effect , key (lock) , economics , pareto optimal , microeconomics , business , industrial organization , computer science , operations management , computer security , multi objective optimization , social science , machine learning , sociology
We study incumbency advantage in markets with positive consumption externalities. Users of an incumbent platform receive stochastic opportunities to migrate to an entrant and can either accept them or wait for a future opportunity. In some circumstances, users have incentives to delay migration until others have migrated. If they all do so, no migration takes place, even when migration would have been Pareto‐superior. We use our framework to identify environments where incumbency advantage is larger. A key result is that having more migration opportunities actually increases incumbency advantage.