An Analysis of the Competitive Dynamics Behind the Disruptor’s Dilemma

The introduction of a potentially disruptive technology into a mature multisided ecosystem often faces a seemingly dilemmatic challenge: persuading a critical mass of incumbents to support the technology that might eventually disrupt them. We analyse this apparently perplexing phenomenon under the lens of a global coordination game of incomplete public and private information; and more precisely an adaptation of a game of regime change. Incumbents can decide to support or not the potential disruptor, who becomes successful only if a sufficient mass of supporters is attained. The proposed model assumes a multi-round game where each round gives the opportunity for yet-not-supporting incumbents to irrevocably side with the potential disruptor. Only a two-round game is detailed, while elements for generalization to an arbitrary number of rounds are suggested. The first round constitutes a rather typical—i.e., extensively scrutinized in the literature—global game, for which it has already formally been established that a monotone equilibrium exists and is unique provided an adequate precision of the information structure. Subsequently, when making their decision during the second round, incumbents gain additional information derived from the first round. Although we do not formally prove the results, we conducted an extensive set of simulations revealing that the new information leads to either no equilibrium or a multiplicity of equilibria. Bearing in mind that our model is overly stylized, those observations suggest that the second round is prone to coordination failure; whereas the precision of information plays an essential role during the first round for incumbents to make an informed decision. It follows that a wise strategy consists for the potential disruptor in investing, at the very outset, in communicating precise information so as to ensure the existence of a unique equilibrium and, should the underlying fundamentals allow, succeed in the first round.

Name dc:type.qualificationname

Master of Business Administration (MBA)

Level dc:type.qualificationlevel

Masters

Grantor dc:publisher.institution

University of Cambridge

Year dc:date.issued

2017

Author dc:creator

• Merckel, Loic

Advisors dc:contributor.advisor

• Ansari, Shahzad
• Mak, Vincent

• disruptive innovation
• multisided platforms
• global games
• coordination games
• incomplete information
• multiple equilibria

Licence

• https://www.repository.cam.ac.uk/bitstreams/d6ac554a-b928-472e-a4c6-647975cb868d/download
• https://www.rioxx.net/licenses/all-rights-reserved/

Language dc:language

en

DOI dc:identifier.doi

https://doi.org/10.17863/CAM.9207

OAI identifier oai:identifier

oai:www.repository.cam.ac.uk:1810/263832