Market Expanding or Market Stealing? Competition with Network Effects in Bike-Sharing
NBER Working Paper No. 24938
The recent rise of dockless bike-sharing is dominated by two firms in China: one started first in 82 cities, 59 of which were subsequently entered by the second firm. Using these variations, we study how the entrant affects the incumbent's market performance. To our surprise, the entry expands the market for the incumbent. Not only does the entry boost its total number of trips and encourage more bike investment, it but also allows the incumbent to achieve higher revenue per trip, improve bike utilization rate, and form a wider and more evenly distributed network. The market expansion effect on new users dominates a significant market-stealing effect on the incumbent's old users. These findings, together with a theoretical model that highlights consumer search and network effects, suggest that a market with positive network effects is not necessarily winner-takes-all, especially when users multi-home across compatible networks.
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Document Object Identifier (DOI): 10.3386/w24938