Quantity vs. quality
Subtitle: exclusion by platforms with networks effects
By: Andrei Hagiu
Contributors: Harvard Business School
Series: Working paper / Harvard Business School -- 11-125; Working paper (Harvard Business School) -- 11-125.
Publisher: Harvard Business School
Published: 2011
Place of publication: [Boston]
Language: eng
Number of pages: 23
Description: This paper provides a simple model of platforms with direct network effects, in which users value not just the quantity (i.e. number) of other users who join, but also their average quality in some dimension. A monopoly platform is more likely to exclude low-quality users when users place more value on average quality and less value on total quantity. With competing platforms, the effect of user preferences for quantity is reversed. Furthermore, exclusion incentives depend in a non-trivial way on the proportion of high-quality users in the overall population and on their opportunity cost of joining the platform relative to low-quality users. The net effect of these two parameters depends on whether they have a stronger impact on the gains from exclusion (higher average quality) or on its costs (lower quantity).
Notes: "May 2011" -- Publisher's website.

"March 14th 2011" -- added t.p.

Includes bibliographical references.