Market Expanding or Market Stealing? Competition with Network Effects in BikeSharing

Guangyu Cao, Ginger Zhe Jin, Xi Weng, Li-An Zhou

NBER Working Paper No. 24938
Issued in August 2018, Revised in August 2019
NBER Program(s):Industrial Organization

Using staggered entry of two dockless bikesharing firms, we find the entrant expands the market for the incumbent. The entry helps the incumbent to serve a greater number of trips, make more bike investment, 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 marketstealing effect on 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 winnertakesall, especially when users multihome across compatible networks.

Acknowledgments

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Document Object Identifier (DOI): 10.3386/w24938