Evaluating Market Entry Strategies for Two-Sided Digital Platforms under Competition: A Simulation Approach

Implementing a proper market entry strategy is a necessity for being successful in establishing a two-sided digital platform. Following the right strategy becomes even more crucial if a competing platform is existing on the targeted market because this makes it more difficult to reach critical mass as users flock to the larger platform due to network effects. In our paper, we introduce an agent-based market simulation that can be used for evaluating alternative strategies and we illustrate its application through an example case that is parameterized with empirical data. Findings from this specific case are discussed and an outlook to further research is provided. While employing marquee users is the most promising strategy with regard to platform growth in our example, this cannot be generalized for other markets or different objectives (such as maximizing profits).