The Quality of Interactions in Competition Between Social Media Platforms

Abstract

Social media platforms are content-based platforms in which agents invest efforts to produce and share content while interacting with one another. The central question involves the trade-off between interaction quantity and content quality, and its impact on competition between an incumbent platform with a focal advantage and a high-quality new entrant seeking market entry. The study focuses on an agent’s utility function, examining the interplay between these factors and exploring strategies for platform decision-makers to maximize profits and benefits for their agents. The findings show that a high-quality non-focal platform has a strategic advantage in winning the market when agents prioritize content quality over the quantity of interactions. Policymakers should take into account the quality-driven impact on market efficiency and entry barriers.