Provisioning of ad-supported cloud services: The role of competition
Motivated by cloud services, we consider the interplay of network effects, congestion, and competition in ad-supported services. We study the strategic interactions between competing service providers and a user base, modeling congestion sensitivity and two forms of positive network effects: network effects that are either "firm-specific" or "industry-wide." Our analysis reveals that users are generally no better off due to the competition in a marketplace of ad-supported services. Further, our analysis highlights an important contrast between firm-specific and industry-wide network effects: Firms can coexist in a marketplace with industry-wide network effects, but near-monopolies tend to emerge in marketplaces with firm-specific network effects.
© 2018 Elsevier B.V. Received 27 February 2017, Revised 19 August 2017, Accepted 8 January 2018, Available online 16 January 2018.