The survival rule of digital platform companies: analysis of an evolutionary game model between giants and start-ups

Digital platform giants have implemented more accessible and harder-to-detect methods to sustain their monopolistic positions, which often involve exclusionary practices and killer acquisitions. These entry-to-exit barriers for start-ups are ultimately stifling innovation. To address the aforementioned issue, we propose a two-stage evolutionary game model to analyze how exclusionary practices affect start-ups’ entrepreneurship and the decisions they confront killer acquisitions by dominant digital platform giants. We also explore the role of regulators in our model. This is followed by equilibrium analysis and then by numerical simulations with different parameters for different situations. We have observed that exclusionary practices pose obstacles to start-ups’ entrepreneurship, making regulatory intervention essential to curb such practices; Larger digital platform giants are more inclined to employ killer acquisitions. In addition, we have reached an interesting conclusion: excessive regulatory control over killer acquisitions may lead to the exit of start-ups from the market. In light of these findings, we emphasize the importance of start-ups adopting distinctive competitive strategies to compete against dominant players in their domain. Furthermore, we advocate for antitrust agencies to broaden their approach targeting the giants and consider the potential impact of their actions on start-ups.