Hype as a Lever: NFT Market Competition Under Bandwagon Effect and Decentralized Secondary Market
The Non-Fungible Token (NFT) market presents a unique competitive landscape driven by low barrier to entry, making it possible for new creators to enter and compete. It also exhibits two distinct features: (1) creators can earn royalties via smart contracts on transactions in a decentralized secondary market where early buyers resell NFTs, and (2) a bandwagon effect, whereby demand rises as more individuals purchase, driven by social conformity. We develop a two-period game-theoretic model consisting of an incumbent creator and a potential entrant, with heterogeneous consumers: tech-savvy adopters, profit-driven investors, and socially influenced late adopters. In the first period, tech-savvy adopters and investors purchase NFTs from the incumbent. In the second period, the entrant decides whether to enter. Subsequently, late adopters choose whether to acquire an NFT from investors through the secondary market or, if available, from the entrant. Our results demonstrate that, counterintuitively, a weaker bandwagon effect can benefit both NFT creators and consumers. Second, customers may also benefit from higher entry costs for NFT creator entrants, or even from the absence of creator competition. Third, while the presence of investors enhances liquidity, it can undermine long-term community value creation. Finally, the creator’s ability to collect royalties from secondary market sales can, surprisingly, benefit consumers. As digital economies expand and blockchain adoption accelerates, NFTs are becoming more prominent. Unlike traditional markets, as NFTs are creative collectibles, NFT markets allow creators to collect royalties from decentralized secondary sales and exhibit strong social conformity effects. Our paper sheds light on these unique market dynamics and offers important managerial insights for this emerging digital economy.
Hubert Pun
Dr. Hubert Pun is the J. Allyn Taylor/Arthur H. Mingay Chair and PhD Program Director at the Ivey Business School. In 2022, he was honored with the university-wide Western Faculty Scholar Award in recognition of his groundbreaking research on blockchain business applications. He has also been consistently acknowledged for his teaching excellence, earning Ivey Dean’s Teaching Commendation Letters (top 10% of Ivey faculty) and being named to the University Students’ Council Teaching Honor Roll in 2016/2017. Additionally, he has received the Research Merit Award (top 10% of Ivey faculty) for seven consecutive years (2019–2025). In 2023, as one of the top recipients, he was named one of two holders of the prestigious J. Allyn Taylor/Arthur H. Mingay Chair. His case, "General Motors: Supplier Selection for Innovation," was the runner-up top seller of the year (2022-2023) at Ivey Publishing. Another of his cases, "Royal Bank of Canada: Bitcoin Mining and Climate Change?" is the winner of the “Finance & Banking” category in the 2023 EFMD (European Foundation for Management Development) Case Writing Competition. Finally, his case, the Dilemma of Zephyr Solaris Energy, received an honorable mention in 2025's Principles for Responsible Management Education (PRME) Case Competition.
His research interests focus on co-opetition, counterfeit products, and blockchain as an enterprise solution. His work has been published in leading journals such as Manufacturing & Service Operations Management (M&SOM), Production and Operations Management (POM), and the Journal of Operations Management (JOM). He currently serves as a Senior Editor at Production and Operations Management (POM) and as an Associate Editor at Transportation Research Part E (TRE) and the International Journal of Production Research (IJPR).
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