Should I Stay or Should I Go? Migrating Away from an Incumbent Platform
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ARTICLE SUMMARY
Incumbents enjoy competitive advantages over new entrants, because users hesitate to abandon a widely-used platform for one with few users. A new model explores factors that increase and reduce incumbency advantage.
POLICY RELEVANCE
Policymakers should examine practices that deter multi-homing.
KEY TAKEAWAYS
- Users may find a service such as a social media platform more valuable if many other users use the same service, resulting in "network effects;" an incumbent platform may have an advantage over a rival newcomer, even if the new platform is superior.
- When Microsoft acquired GitHub, a platform that supports collaborative coding, regulators concluded that Microsoft would not be able to use GitHub to favor its own products, because of the sophistication of GitHub users; this contradicts the theory that incumbency advantage can never be overcome.
- When the new platform is superior, every user would be better off if all users migrated simultaneously to the new platform; however, each user will delay so as not to miss out on the benefits of other users' presence, and migration will never occur.
- Incumbency advantage is smaller when users have only one opportunity to migrate; also, when opportunities for migration arise at a greater rate, the incumbent's advantage is stronger.
- Users are more likely to delay migration when they can wait for a better time.
- This helps explain how Google has maintained its position as the dominant search engine.
- Users are more likely to delay migration when they can wait for a better time.
- Individuals can adopt more than one platform, a practice known as multi-homing.
- Multi-homing reduces incumbency advantage, but does not eliminate it.
- Policymakers should identify practices that discourage multi-homing.
- Multi-homing reduces incumbency advantage, but does not eliminate it.
- If users are very different from one another, different groups may settle on different platforms; this helps explain how Facebook gained users even though MySpace was the incumbent platform.
- An entrant can reduce an incumbent's advantage by adopting capacity constraints, that is, by limiting the number of users that can join; fear of being left behind makes it more likely for new users to migrate.
- Incumbency advantage increases when migration depends on the spread of information by word of mouth; incumbency advantage is less when users decide autonomously whether to migrate.
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About Gary Biglaiser
Gary Biglaiser is a Professor with the Department of Economics at the University of North Carolina – Chapel Hill. He has wide-ranging research interests in applied microeconomic theory with a concentration on industrial organization and regulation. His most recent research is focused on durable goods monopoly (with James Anton), Moonlighting (with Albert Ma) and dynamic oligopoly (with Nikos Vettas).
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About Jacques Crémer
Jacques Crémer is a Toulouse School of Economics (TSE) Research Faculty and Professor of Economics at the Toulouse School of Economics (TSE). He has done fundamental work on planning theory, the theory of auctions and organization theory. Professor Crémer’s current research interests are the theory of organizations, political economy, and networks, software and the internet.
