Ahmadreza Mostajabi

Ahmadreza Mostajabi

Assistant Professor @ Singapore Management University

Working Papers

Market Homogenization: How Creating New Product Markets Impacts Matchmaking and Innovation in Platform Marketplaces

Abstract:

This study examines how creating new, more homogenous product markets affects user demand and complementor innovation. Analyzing a structural change in Google Play Store, I find that market homogenization improves matchmaking in both newly created and existing segments by lowering user search costs. However, its effects on innovation are more nuanced: whereas in new segments, complementors increase innovation in response to heightened competitive intensity and increased value-capture opportunities, innovation declines in existing segments, where the repositioning of products reduces rivalry in the absence of growth signals. Combining archival analysis with an online experiment, this paper shows how market structures, by means of the number and the homogeneity of products, shape user demand and firm behavior, offering new insights into the tradeoffs of redesigning market structures.

Keywords:

complementor innovation; market competition; product markets; market homogeneity; matchmaking; platform marketplace