Winner-does-not-take-all: Selective attention and local bias in platform-based markets

We examine competition between platforms in platform-based markets with agent-based modeling. In our proposed model, a consumer adopts a platform that offers the most relative utility of competing platforms. More specifically, the utility is derived from the local direct network effects arising from the social network of the consumer and the indirect network effects arising from complementary products of the platform. We portray the consumer as selectively attentive and locally biased. We contrast the proposed model to several alternative models with empirical data from the competition between Sony’s PlayStation 3 and Microsoft’s Xbox 360 and show that the proposed model, where the aforementioned consumer characteristics, and platform pricing, explain the adoption decisions of consumers and thus the division of the market between platforms. We offer important insights on how the dynamics of competition on the macro-level emerge from micro-level interactions between consumers.