Product Experimentation, Information Diffusion and Platform Encroachment

Wing Man Wynne Lam, Xingyi Liu

Research output: Contribution to journalArticlepeer-review

Abstract

Platforms provide great opportunities for independent sellers to experiment with new products. By facilitating transactions between trading parties, platforms can gather a huge amount of information about successful products and introduce their own versions of competing products. This phenomenon of platform encroachment has received attention from various stakeholders, and concerns have been raised about how it may marginalize independent sellers and hinder the development of the ecosystem. At the same time, platforms expedite the diffusion of information about successful products and facilitate learning and imitation from other independent sellers, which has received little attention in the literature. In this article, we explicitly account for this feature and consider a dynamic model to study the impact of platform encroachment on sellers’ incentives to experiment with new products, when both the platform and independent sellers can imitate and introduce competing versions of products offered by the successful experimenter. We show that when a seller with successful experimentation holds a competitive advantage in the product market, platform encroachment may enhance the incentives to carry out experimentation. This enhancement effect is stronger when information diffuses faster on the platform. We further discuss the implications for the platform’s optimal encroachment strategy and regulatory policies.
Original languageEnglish
Number of pages18
JournalProduction and Operations Management
Early online date29 Nov 2024
DOIs
Publication statusE-pub ahead of print - 29 Nov 2024

Bibliographical note

Copyright © The Author(s) 2024. This article is distributed under the terms of the Creative Commons Attribution 4.0 License (https://creativecommons.org/licenses/by/4.0/) which permits any use, reproduction and distribution of the work without further permission provided the original work is attributed as specified on the SAGE and Open Access page (https://us.sagepub.com/en-us/nam/open-access-at-sage).

Keywords

  • Imitation
  • Information Diffusion
  • Informational Advantage
  • Platform Encroachment
  • Product Experimentation

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