Essays on Competition in the Tech Industry and Platform Economies
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Date
2024-08-07
Authors
Chang, Boyoon
Journal Title
Journal ISSN
Volume Title
Publisher
University of Oregon
Abstract
This dissertation examines competition dynamics within technology industries and platform-based economies. It examines three core aspects: acquisition strategies employed by incumbent firms, pricing strategies undertaken by an entrant firm, and the impact of antitrust regulatory interventions.
Chapter 1 gives an overview of each dissertation chapter. In the second chapter, I investigate the acquisition strategies of major tech companies -- Google, Amazon, Apple, Meta, and Microsoft, and the interactive dynamics at play. This study separates the underlying motivations that drive these firms to make acquisition decisions, distinguishing between internal motives that seek scale economies and competitive motives that arise to prevent a competitive disadvantage. Using a rich dataset of acquisition records, I quantify the degree to which these firms are responsive to these distinct motivations. By accounting for forward-looking behavior of firms and relying on Markov Perfect Nash Equilibrium concept, I find a set of parameter estimates that make agents' observed actions yield higher expected future returns than their alternatives while also making their observed actions the best response to the moves of other market players. I find that competitive motives can explain a significant share of acquisition decisions, sometimes overshadowing the internal motives.
The third chapter, co-authored with Keaton Miller, studies the commission rate policies of leading app distribution channels. It examines the effect of the regulatory intervention that aimed to change these policies. Specifically we investigate the effect of the legislation implemented in South Korea that allows developers to opt for mobile payment systems outside the conventionally required billing system of the app stores. We investigate how this regulation affected app performance, particularly among apps which were likely to be most influenced by this change. Using difference-in-differences and triple-difference-in-differences techniques, our finding suggests a potentially positive impact on app revenue, albeit with some degree of noise due to limited data. These results represent a novel finding, as they represent one of the first attempts to empirically measure the effects of this legislation.
The fourth chapter explores whether aggressive pricing strategies can provide a competitive advantage to a smaller app distribution platform with a limited user base. Using proprietary data of one of the minor platforms in South Korea which charges significantly lower commission rate relative to the major players, I use difference-in-differences technique to examine key app performance metrics. I find that the volume of in-app traffic and the number of paid users increase, which implies that the strategy is successful in attracting user traffic on the platform in the short term, while I find these effects to be more significant in the short-run than in the longer-term.
Overall, this dissertation provides comprehensive insights into competition within the tech industry and platform economies. It analyzes the regulatory effects aimed at spurring competition, examines the competition and strategies among incumbent firms, and explores the strategies employed by a new firm to compete against the established incumbents. This dissertation includes unpublished co-authored material.