Platform Standards, Collusion and Quality Incentives

Salim, Claudia (January 2009): Platform Standards, Collusion and Quality Incentives. SFB/TR 15 Discussion Paper No. 257

Abstract

This paper examines how quality incentives are related to the interoperability of competing platforms. Platforms choose whether to operate standardised or exclusively, prior to quality and subsequent price competition. We find that platforms choose a common standard if they can coordinate their quality provision. The actual investment then depends on the cost of quality provision: If rather high, platforms refrain from investment; if rather low, platforms maintain vertically differentiated platforms. The latter case is socially more desirable than exclusivity where platforms do not invest. Nevertheless, quality competition of standardised platforms induces the highest investment and maximum welfare.

• Item Type: Paper
• Keywords: two-sided markets, standards, investment in transaction quality
• Faculties: Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems; Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems > A1 - Allokationsmechanismen in Organisationen und Märkten
• Subjects: 300 Social sciences > 330 Economics
• Language: English