Network Switching under Price Incentives : Evidence from Mobile Payment

Network-based services (e.g., mobile payments and game consoles) are commonly observed in the economy, where consumers shop both within each network and across multiple networks. This multi-homing demand structure raises a question: How do consumers reallocate their usage when offered price incentives to adopt a new network? We collect a proprietary dataset of undergraduate students’ mobile payment transaction records in a major Chinese university and explore how a UnionPay promotion event affects their payment registration switching between UnionPay and Alipay. We document a complete payment network shift with augmented spending during the UnionPay promotion: (1) Students switch from Alipay to UnionPay and expand their shopping varieties to earn discount rewards. (2) For merchants accepting both Alipay and UnionPay, UnionPay-registered students strongly prefer the latter even among transactions ineligible for discounts. (3) UnionPay users spend 28.12% and 89.36% of their earned rewards on additional spending in dining and grocery, respectively. We find an inverse-U-shaped promotion effect over consumers' familiarity with the promotion: Sophomore students respond more aggressively than others in payment adoption and boosting. Additionally, users with higher spending intensity before promotion are more likely to switch payments and expand their shopping variety, but do not increase spending as significantly as others