Network Effects, Consumer Expectations and Ride-hailing Rivalries: Understanding How Platform Entries Influence New Car Sales

Abstract

The gradual entries of ride-hailing platforms across China provide us with a unique opportunity to examine the interplay among network effects, consumer expectations and platform competition in the sharing economy. While recent empirical evidence shows that the initial entry of Didi Chuxing (the leading ride-hailing platform in China) positively impacts new car sales in the short run, our study demonstrates that, once the time window of investigation is expanded from one year to three years, the impacts of entries on new car sales turn negative. In addition, our analysis provides evidence suggesting that intensified competition resulting from platform rivalries can boost new car sales to alleviate the negative impacts in the short run.