Code for: Smaller Slices of a Growing Pie: The Effects of Entry in Platform Markets

Entry of new firms onto a platform, has an ambivalent effect on the incumbent firms operating on the platform: the main tension lies between the negative effects of increasedcompetitive pressure and positive indirect network effects. This paper empiricallystudies the net effect of these countervailing forces and its dependence on firm quality,using a quasi-exogenous shock on a large online platform. On average, market expansion favors incumbents, though the average effect masks substantial heterogeneity:High-quality incumbents experience significant increases in sales and revenue, whereaslow-quality firms perform unambiguously worse. Lastly, the paper explores the mainmechanisms and firms' responses.