|
In the information industry, the competition of platforms, such
as OS and CPU, has far-reaching impacts on the formation of
standards and thus the market positions of the players. Because
of the strong network effects, the competition in this market
sometimes leads to a scenario of *the winner takes all* when the
market share of some platform exceeds a so-called critical mass.
To understand the underlying mechanisms, this thesis tries to
apply the game theory?}_Evolutionary Stable Strategy (ESS) to
study the competition of two platforms. ESS is appropriate for
modeling in that it can be used to analyze the dynamics of a
large group of players with bounded rationality. Through rather
easy mathematical deduction, ESS can show the market evolution
of products of different characteristics. In this thesis, the
equilibrium models of ESS are first used to categorize the
markets of information products, and the asymmetric models, to
explain the network externalities of platforms. Then based on
the characteristics of platforms (including the accumulation of
users* value and users* adoption costs) and the time lag of
introducing incompatible platforms (meaning that customers are
*locked-in* to the platform introduced earlier), the competition
of platforms are classified into eight groups each with
different types of market evolution. The main findings of this
thesis are as follows. I. The competition of two platforms may
result in three kinds of markets:A. Monopoly of one platform
that is superior to the other * from the customers* standpoint *
or that is introduced to the market earlier.B. Oligopoly of two
platforms each with certain market shares.C. The winner takes
all when its market share exceeds some critical mass.II. The
competitive strategy for platforms consists of two periods:A.
When the platforms are introduced, the competitors should take
into consideration two crucial dimensions: the characteristics
of the platforms and the time lag of introducing incompatible
platforms. Also the competitors should decide whether and to
what degree the standards are open or proprietary. Besides,
late entrants can adopt the strategy of compatibility.B. When
the markets are growing, the competitors should focus on
accelerating the market adoption of products, increasing the
market share, and lowering the critical mass. In conclusion, the
competitors should give heed to the evolution of the games and
the game rules as well. If possible, they should also actively
change the game rules to their advantage.
|