Market‐expanding or Market‐stealing? Competition with network effects in bike‐sharing

The recent rise of dockless bike-sharing is dominated by two firms in China: one started first in 82 cities, 59 of which were subsequently entered by the second firm. Using these variations, we study how the entrant affects the incumbent's market performance. To our surprise, the entry expands the market for the incumbent. Not only does the entry boost its total number of trips and encourage more bike investment, it but also allows the incumbent to 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 market-stealing effect on the incumbent's 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 winner-takes-all, especially when users multi-home across compatible networks. Guangyu Cao Guanghua School of Management Guanghua-ofo Center for Sharing Economy Resarch Peking University Beijing 100871 China cgy1117@pku.edu.cn Ginger Zhe Jin University of Maryland Department of Economics 3115F Tydings Hall College Park, MD 20742-7211 and NBER jin@econ.umd.edu Xi Weng Room 304, Guanghua New Bldg Peking University Beijing, China wengxi125@gsm.pku.edu.cn Li-An Zhou Guanghua School of Management Peking University Beijing 100871 CHINA zhoula@gsm.pku.edu.cn