Digitization and the New Dimensions of Competition: The Case of Digital Platforms in the Sharing Economy

Digital platforms have entered a number of industries and changed the landscape of competition. A main change is in the role of platform users who not only consume services but contribute to value creation through new services as well. Drawing on the theory of newly vulnerable markets and platform economics, we develop propositions about those changes and the strategic actions they bring about. When a platform focuses on cost efficiency, exerting tight control and promoting competition among platform users is proposed. When a platform focuses on service differentiation exerting loose control and promoting coopetition among platform users is proposed. To illustrate and support our propositions, we refer to the two leading sharing economy platforms, Airbnb and Uber that made different strategic choice on competition and cooperation with their users.