Does a Platform Monopolist Want Competition?

Niedermayer, Andreas (22. September 2015): Does a Platform Monopolist Want Competition? SFB/TR 15 Discussion Paper No. 523

Abstract

We consider a software vendor first selling a monopoly platform and then an application running on this platform. He may face competition by an entrant in the applications market. The platform monopolist can benefit from competition for three reasons. First, his profits from the platform increase. Second, competition serves as a credible commitment to lower prices for applications. Third, higher expected product variety may lead to higher demand for his application. Results carry over to non-software platforms and, partially, to upstream and downstream firms. The model also explains why Microsoft Office is priced significantly higher than Microsoft’s operating system.

• Dokumententyp: Paper
• Keywords: Platforms, Entry, Complementary Goods, Price Commitment, Product Variety, Microsoft, Vertical Integration, Two-Sided Markets
• Fakultät: Sonderforschungsbereiche > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems > C6 - Kommunikations- und Transporttechnologien, Industrie- und Regionalstruktur
• Themengebiete: 300 Sozialwissenschaften > 330 Wirtschaft
• JEL Classification: D41, D43, L13, L86
• Sprache: Englisch