Platform State Dependence and Cross-Category Spillover in Multi-Homing Platforms

This study examines the impact of large-scale subsidy campaigns on consumer loyalty in a two-sided multi-homing context, where both business owners and consumers simultaneously participate on multiple platforms. We ask whether temporary price subsidies in one category can generate lasting changes in consumer purchase behavior, and whether these habits spill over into other categories even in the absence of subsequent promotions. We collaborate with a third party company with order-level data from multiple major instant retailing platforms, and build a dynamic competition model that incorporates consumers’ purchase history as a state-dependent factor. By modeling platform–category state dependence, we identify platform-level stickiness that extends beyond traditional brand-level state dependence, while also capturing potential cross-category spillover effects. For identification, we exploit an exogenous shock to prices arising from a subsidy war, leveraging its staggered rollout and differential intensity across platforms and categories. The results help managers assess the overall return on subsidy campaigns.

Recommended citation: Yuan, Lisha and Zachary Zhong. "Platform State Dependence and Cross-Category Spillover in Multi-Homing Platforms." Research in Progress.