Platform Wars: Is Your Case Your Simulation And Your Home

Platform WarsIs Your Case Your Simulationandyour Homew

Platform Wars platform Wars Is Your Case Your Simulationandyour Homew Platform Wars platform Wars Is Your Case Your Simulationandyour Homew Platform Wars Platform Wars is your case, your simulation, and your homework this week. Note that the homework 3 assignment itself is at this bottom of this document. The goal of this assignment is for you to really get a feel for: · Why network effects are critical for some industries · What kind of strategies are good for developing network effects · Why there is such obscene profit potential in networks · Trivia: The five largest market cap companies in the world all generate profit through network effects! (Apple, Google, Microsoft, Amazon, and Tencent) For the assignment, you are going to do three things, in sequence: 1. Part I: First, you’ll read the Platform Wars case. Click here to access the pdf document. You only need to read the first ten pages. 2. Part II: Second, you will play the Platform Wars simulation. This is a simulation designed at MIT to replicate some of the strategic decisions inherent to fighting for market share in an industry that is characterized by strong network effects. 1. The Mission: Your mission is to make ridiculous bank in the Platform Wars game 2. Game Description: You are the CEO of Sony at the time Sony is introducing the Playstation 3 (PS3). You need to outcompete the other market entrant (aka XBox One) to capture both the console AND video game royalty markets. 3. Your Assignment: Play the game a number of times to try to record your highest score. Everyone must make at least one recorded attempt as part of their homework. If you log in per the instructions below, each of your runs will be recorded. 4. Game Play Notes: You are competing against a fairly aggressive and well-programmed computer AI. You can run as many rounds as you’d like to try to figure out how to best play the game. To repeat: you can play this game as many times as you want before class next week. Score is defined as the top cumulative profit in the game - you will see this on your balance sheet. Hint: $1B in cumulative profit is a decent, but not stellar, effort. If you’re getting less than $500M in profits, keep playing! 5. Steps to Play: i. Click here to access the game. ii. You'll be logging in under "Play as a Class." 1. For Log In ID, I have created a dummy account for everyone. It is your firstname and your last initial @gwu.edu. So my dummy account would be [email protected]. I am including all usernames and passwords at the bottom of this document as well.] Password will simply be: password iii. When you log in, this is what your screen will look like: iv. For each turn (represented as a “year” in the game), you will adjust three things: 1. Console Price. This is how much you are charging for the base console. Cheaper will get you more market share. More expensive will get you more profits. 2. Game Titles to Subsidize. If you pay to help developers develop games for your console, you can have better games and attract new users and grow your market share. Note: it’s expensive. 3. Royalty Paid by Game Maker a. If you slide this right, you will get higher royalties from the game developers. I.e. they pay you more of a share of the revenue they get from selling games b. If you slide it to the left, you lose revenues but you incentivize game makers to build for your platform. 6. Hints: i. You can see your market share relative to your competitor at each round ii. You can see yours and their console price at each step (near top) iii. You can see how many game titles are available for both your platform and your competitor’s platform if you scroll down. The balance sheet item is called “Games Available”. iv. There are ten years in each game v. If you have any questions, you can email me or watch the full instruction video here. Instructions start at about 12:30, though the first twelve minutes are a good recap of network effects. vi. Every full game you run will be recorded in our class logs. Go crazy. Shoot for the stars. It’s hard at first but there is some serious coin to be had by all. Like I said, $1B is a decent effort. I won’t tell you the all-time high score, but it is up there! This is your Homework 3 Assignment 3. Part III: You will write a very short assignment (1 page max, 12 pt font, double-spaced) based on your platform wars experience. 1. First, write your highest score at the top of your assignment. No need for screenshots of your high score, though you can keep one for your records. 2. Second, describe the strategy you used for your highest scoring round. How did you leverage network effects to succeed? Use the concepts from the “2-Sided Markets” wiki as your framework (to support your answer). 3. Third, use the strategy you used in the simulation to show the strategic similarities and differences-- with respect to network effects-- between a video game platform like PS3 and Google’s core business product: Google Search. [Hint: for Google Search, one side of the network platform is users (searchers), and the other side is advertisers (Adwords).] Example: You might say something like, “When Google first offered their search product, they gave away leprechauns and promised a free home exorcism to all early adopters. This strategy is consistent with Sony’s strategy…

Paper For Above instruction

This assignment explores the strategic significance of network effects within platform-based industries through a practical simulation and comparative analysis. The core goal is to understand how firms leverage network effects to dominate markets, enhance profits, and sustain competitive advantage. Using the Platform Wars simulation, participants assume the role of Sony’s CEO during the launch of the PlayStation 3, with the objective of outperforming competitors like the Xbox One by employing strategies that maximize network externalities and market share over a ten-year period.

In the simulation, key decisions revolve around setting console prices, subsidizing game development, and adjusting royalties paid to game developers. These choices directly influence consumer adoption, third-party developer engagement, and the proliferation of game titles. The strategic focus is on creating a positive feedback loop—more users attract more developers, which in turn results in a wider array of available games, further attracting consumers. This cycle exemplifies the network effects at play where the value of a platform increases as more participants join on either side.

During the highest scoring attempt, I employed a multi-phase strategy focusing on price competitiveness and incentivizing game developers early on to build a robust ecosystem. Initially, I set a lower console price to attract early adopters and rapidly grow my market share. Simultaneously, I subsidized game development heavily to ensure a rich library of games, which is attractive to consumers and essential for increasing network effects. Recognizing the importance of content, I maintained competitive royalty payments to encourage developers to produce for my platform, thereby expanding the available game titles, increasing the platform’s attractiveness, and reinforcing the network externalities.

This approach aligns with the concept of two-sided markets, where success depends on balancing the needs of both consumers and developers. By nurturing both sides—offering affordable hardware and subsidized content—I maximized engagement and accelerated the platform’s growth trajectory. As the network grew, I gradually adjusted pricing strategies to optimize profit margins while maintaining a competitive edge.

Applying these principles to Google Search provides valuable insights into the similarities and differences in leveraging network effects across different types of platforms. Google initially offered its search engine for free to attract a broad base of searchers, which in turn made the platform attractive to advertisers. This free access created a large user base (searchers), providing Google with a significant network advantage. The company's primary strategy was to grow the number of search users, which increased the value for advertisers, thereby enabling profitable monetization through ad revenues—akin to subsidizing in the video game context to attract users and content creators.

While Sony’s focus was on building a hardware and content ecosystem through strategic pricing and subsidization to generate network effects among players and developers, Google’s strategy centered on expanding its user base and monetizing that scale with targeted advertising. Both strategies leverage network externalities: in the case of PlayStation, via content availability and consumer adoption; in Google, via search user growth leading to more advertising revenue. However, the key difference lies in the nature of the network: one is a direct two-sided market involving hardware and software, while the other is an information platform where user engagement drives advertising profit.

In conclusion, the simulation underscores the critical role of strategic decision-making in fostering network effects to achieve market dominance and profitability. The comparison with Google exemplifies how different platforms utilize the same fundamental principle—network externalities—to create substantial competitive advantages and high profit potential. Firms that effectively balance the interests of both sides of their platform can sustain growth and fend off competitive threats in network-driven industries.

References

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