Ma Hongxia

Abstract:
We study how the evolution of consumer beliefs with market history shapes dynamic competition between two vertically differentiated platforms in the presence of network effects, using the notion of partial focality. We develop a tractable model in which focality evolves according to a generalized exponentially weighted moving-average rule. Platforms may differ both in their initial focality levels and in the persistence of their focality processes, capturing asymmetries in how consumer beliefs respond to market outcomes. We show that when focality adjusts more slowly to recent market outcomes, initial coordination advantages become more difficult to overturn, reducing both allocative efficiency and consumer surplus. Greater platform patience improves allocative efficiency only when the quality advantage of the high-quality platform is sufficiently large relative to its disadvantage in focality persistence. Finally, we allow platforms to make initial marketing investments that affect either the level or the persistence of focality. Under either channel, the high-quality platform has a stronger incentive to invest in marketing and thereby wins the market.

Conferences and talks: Platform Strategy Research Symposium, Boston University, 2026; Asian Game Theory Conference, 2026 (forthcoming); INFORMS Job Market Showcase, 2026 (forthcoming).

Abstract:
There is a common presumption that network effects intensify firms’ race to enter first as they seek to secure an incumbency advantage. We explore this possibility in an infinite-horizon model in which two vertically differentiated firms decide whether and when to enter a growing market. Incumbency advantage arises endogenously from consumer beliefs in the post-entry pricing subgame: whenever multiple equilibria exist, consumers coordinate on a focal firm. We compare alternative specifications of focality dynamics. When focality is locked into the first entrant, network effects indeed amplify inefficient early entry. However, when focality adapts quickly to recent market outcomes, network effects can instead mitigate premature entry for sufficiently patient firms by weakening the low-quality firm's preemption incentive. This effect can be surprisingly pronounced in a growing market. When firms are sufficiently patient and network effects are sufficiently strong, adaptive focality can tilt the entry race in favor of the high-quality firm even more than a focality structure that always favors it.

Conferences and talks: Asia-Pacific Industrial Organization Conference (APIOC), 2024; NUS Microeconomic Theory Reading Group; NTU Brown Bag Seminar.