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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/29458
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| Title: | Decomposing the Congestion Effect and the Cross-Platform Effect in
Two-Sided Networks: A Field Experiment |
| Authors: | Tucker, Catherine - MIT Sloan School of Management
Zhang, Juanjuan - MIT Sloan School of Management |
| Keywords: | Competition, Entry, Inference, Congestion, Decision-making Under
Uncertainty, Two-Sided Markets |
| Issue Date: | 2008 |
| Series/Report no.: | Net Institute Working Paper;08-12 |
| Abstract: | This paper highlights how the provision of information about user
participation can serve as a strategic marketing tool for firms seeking
to grow two-sided exchange networks. A two-sided exchange network is a
business model (such as Ebay or Craiglist) where revenue is generated
from persuading people to buy and sell items through that particular
exchange. It is not immediately clear whether broadcasting information
about the number of sellers will grow further seller participation. On
the one hand, a strong rival presence may dissipate payoff (a
'congestion effect'). On the other hand, a large number of rivals may
signal high buyer demand (a 'cross-platform effect'). We use field
experiment data from a B2B web site that brings together buyers and
sellers of used equipment and real estate. Before each seller made a
posting request, the web site randomized whether to disclose the number
of buyers and/or sellers, and the exact number to disclose. We find that
when presented together with the number of buyers, a larger number of
sellers makes sellers less likely to list their products, indicating a
negative congestion effect. However, when the number of sellers is
presented in isolation, its negative impact on entry is significantly
reduced, indicating a positive cross-platform effect. Higher buyer
search intensity amplifies the moderating role of demand uncertainty.
The results suggest that information on the number of users can be an
effective tool to grow two-sided networks but should be used
strategically. A network can attract more users by advertising dense
competition when demand is not transparent, especially in
search-intensive markets. |
| URI: | http://hdl.handle.net/2451/29458 |
| Appears in Collections: | NET Institute Working Papers Series
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