infonet-economy

This paper outlines and analyzes different competitive strategies for an established platform provider in a two-sided market to defend against various forms of attack. Taking into account the characteristics of two-sided markets, we consider strategies based on product innovation
and network effects, process innovation and pricing, multiple platforms, and switching costs.
Network effects introduce dynamics that can quickly displace an incumbent platform.
However, a platform provider can also use network effects to its advantage, entrenching itself firmly in the market by using appropriate strategies. These strategies are developed theoretically and illustrated by example of the mail industry.