Under Review

Myopic Expansions on Platforms: Evidence From Mobile Application Markets

• R&R at Administrative Science Quarterly
• Presented at SMS, DRUID, and Strategy Science Conferences
• with Prof. Keyvan Vakili (LBS) and Prof. Aldona Kapacinskaite (Bocconi)

Abstract:

The literature on market design and multisided platforms focuses primarily on the positive impact of resolving market frictions on the aggregate market size and efficiency. In this paper, we argue that extensive resolution of market frictions associated with market entry on multisided platforms can nudge platform participants to overlook the heterogeneous nature of different markets and, consequently, to engage in large-scale, myopic market expansions. These expansions, in turn, can lead to lower customer satisfaction and performance. We test our arguments in the context of Apple’s App Store. We find that app developers’ large-scale market expansions increase their client base in the short run but negatively affect their ratings, downloads, financial performance, and innovation rate in the longer run.

Keywords:

platform strategy; multisided platforms, market entry; market frictions; market design, mobile apps; complementor performance