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Abstract

Implementing a proper market entry strategy is a necessity for successfully establishing a two-sided digital platform. Following the right strategy becomes even more crucial if a competing platform already exists in the targeted market: It is more difficult to reach critical mass because users flock to the already established, larger platform due to network effects, resulting in a potential winner-take-all situation. While previous research proposes strategies, it does not discuss how to find the right strategy. This paper introduces an agent-based market simulation for comprehensively evaluating alternative strategies under competition, that is, not only with regard to platform adoption for the entrant but also taking into account transactions, earnings, and weakening the incumbent. Through an example case parameterized with empirical data, it illustrates the application of the model. The findings suggest that a comprehensive evaluation of market entry strategies beyond just looking at membership figures is necessary because different strategies can be the most promising one with regard to platform growth of the entrant, weakening the incumbent, and for boosting the entrant’s transactions and earnings.