21 research outputs found
Competing in Markets with Digital Convergence: Product Differentiation, Platform Scope and Equilibrium Structure
The incorporation of digital technologies into the products of diverse industries, accompanied
by a shift to von-Neumann-like platform architectures, while resulting in substantially more valuable
and flexible products, also leads to increased substitutability across previously distinct markets. This paper
analyzes the economic implications of this trade-off in technology markets subject to digital convergence.
We present a new model of imperfect competition that captures flexible platform scope, variability in consumer
requirements, and multiple product purchases. We specify four types of equilibrium configurations
- local monopoly, kinked, competitive and non-exclusive - that emerge as outcomes of the model, and
describe how each equilibrium structure characterizes a distinct stage of digital convergence.
Our analysis establishes that as markets converge, prices always rise initially even as competing products
become less differentiated. However, when platform scope is largely dictated by exogenous factors, prices
and profits eventually fall as the stage of convergence progresses, though consumer surplus and total
surplus rise. Furthermore, while convergence has the expected effect of shifting consumption patterns
from purchasing multiple specialized products to buying a single general-purpose product, we describe
examples of equilibria in which consumers may buy multiple general-purpose products, using each for
a specialized subset of their requirements. Pricing responses to changes in variable costs and consumer
functionality needs are also discussed.
When firms can make strategic choices of platform scope, we show that in any subgame perfect equilibrium,
duopoly prices are always higher than monopoly prices, and industries may sustain high levels of
profitability even when their boundaries blur. We also establish that as technological progress lowers fixed
costs, a natural outcome is for unregulated firms to over-invest in platform scope relative to the social
optimum, and that this outcome is true under both monopoly and duopoly market structuresInformation Systems Working Papers Serie
Product Scope and Entry Deterrence in Technology Markets
We model an oligopolistic technology market in which firms endogenously choose product scope,
fixed costs are affected by exogenous technological progress, and there may be threat of entry. Our
analysis shows that equilibrium outcomes involve substantial overinvestment in product scope,
which benefit consumers and hurt firms, relative to the social optimum. Technological progress
generally increases consumer surplus and lowers firm profits. If entry is threatened bilaterally
across two converging markets, both either accommodate entrants from the rival market, or both
deter entry; continuous progress in technology can cause equilibria shifts, leading to discontinuous
and radical redistribution of surplus across markets.Information Systems Working Papers Serie
Market Expansion or Margin Erosion: The Double-Edged Sword of Digital Convergence
Digital convergence enables firms in the computing, communications, and electronic consumer industries to design and launch multifunctional converged products. This presents firms with a significant opportunity for value creation and profit growth. At the same time, the increased substitutability between products supplied by different industry segments heightens competition and poses a significant threat of margin erosion. These conflicting incentives make it difficult for firms in converging industries to make strategic product line and product design decisions. In our study, we analyze the technological, product, and market factors that have an impact on these decisions and derive conditions under which it is (and is not) optimal for firms to launch converged products that combine the functionalities of products in two different industries. We find that the optimality of including converged products in the product line depends crucially on the synergies arising out of functionality colocation. Further, as technology permits higher levels of product convergence, converged products relegate specialized products to narrow market niches, even when there is some quality degradation from functionality colocation. Overall production and total firm profits tend to increase, although the impact on consumer surplus and total welfare is ambiguous
Leadership Training In An MBA Program Using Peer-led Team Learning
Leadership training is an important part of any MBA program, but is often difficult to provide in an effective way. Over the last three years, we implemented a program of Peer-Led Team Learning in two core courses of our MBA curriculum, which we believe provides a good solution. The program combines leadership training with practical hands-on application of the ideas taught, and provides for an effective feedback loop. Response to the program has been overwhelmingly positive. The program and benefits for learning leadership are discussed in this paper
Product Scope and Entry Deterrence in Technology Markets
We model an oligopolistic technology market in which firms endogenously choose product scope,
fixed costs are affected by exogenous technological progress, and there may be threat of entry. Our
analysis shows that equilibrium outcomes involve substantial overinvestment in product scope,
which benefit consumers and hurt firms, relative to the social optimum. Technological progress
generally increases consumer surplus and lowers firm profits. If entry is threatened bilaterally
across two converging markets, both either accommodate entrants from the rival market, or both
deter entry; continuous progress in technology can cause equilibria shifts, leading to discontinuous
and radical redistribution of surplus across markets.Information Systems Working Papers Serie
Competing in Markets with Digital Convergence: Product Differentiation, Platform Scope and Equilibrium Structure
The incorporation of digital technologies into the products of diverse industries, accompanied
by a shift to von-Neumann-like platform architectures, while resulting in substantially more valuable
and flexible products, also leads to increased substitutability across previously distinct markets. This paper
analyzes the economic implications of this trade-off in technology markets subject to digital convergence.
We present a new model of imperfect competition that captures flexible platform scope, variability in consumer
requirements, and multiple product purchases. We specify four types of equilibrium configurations
- local monopoly, kinked, competitive and non-exclusive - that emerge as outcomes of the model, and
describe how each equilibrium structure characterizes a distinct stage of digital convergence.
Our analysis establishes that as markets converge, prices always rise initially even as competing products
become less differentiated. However, when platform scope is largely dictated by exogenous factors, prices
and profits eventually fall as the stage of convergence progresses, though consumer surplus and total
surplus rise. Furthermore, while convergence has the expected effect of shifting consumption patterns
from purchasing multiple specialized products to buying a single general-purpose product, we describe
examples of equilibria in which consumers may buy multiple general-purpose products, using each for
a specialized subset of their requirements. Pricing responses to changes in variable costs and consumer
functionality needs are also discussed.
When firms can make strategic choices of platform scope, we show that in any subgame perfect equilibrium,
duopoly prices are always higher than monopoly prices, and industries may sustain high levels of
profitability even when their boundaries blur. We also establish that as technological progress lowers fixed
costs, a natural outcome is for unregulated firms to over-invest in platform scope relative to the social
optimum, and that this outcome is true under both monopoly and duopoly market structuresInformation Systems Working Papers Serie
Exclusive Licensing in Complementary Network Industries
This paper develops and analyzes a model of competition between
platforms in an industry with indirect network effects, with a specific
focus on complementary product exclusivity. The objective is to
understand the determinants of exclusivity and explore its effects on
competition. We find that the stage of platform market maturity and the
asymmetry between the installed bases of platforms are critical
determinants of exclusivity. Exclusivity is the dominant outcome in the
nascent stage of the platform market and is sometimes the outcome in
mature stages as well, while non-exclusivity is the usual outcome in the
intermediate stages. In the nascent stages, the bigger platform secures
exclusivity, while in the mature stages it is the smaller platform
Exclusive Licensing in Complementary Network Industries
This paper develops and analyzes a model of competition between
platforms in an industry with indirect network effects, with a specific
focus on complementary product exclusivity. The objective is to
understand the determinants of exclusivity and explore its effects on
competition. We find that the stage of platform market maturity and the
asymmetry between the installed bases of platforms are critical
determinants of exclusivity. Exclusivity is the dominant outcome in the
nascent stage of the platform market and is sometimes the outcome in
mature stages as well, while non-exclusivity is the usual outcome in the
intermediate stages. In the nascent stages, the bigger platform secures
exclusivity, while in the mature stages it is the smaller platform