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Review of Network Economics

Editor-in-Chief: Grzybowski, Lukasz

Ed. by Briglauer, Wolfgang / Goetz, Georg / Pereira, Pedro

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IMPACT FACTOR 2016: 0.500
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1446-9022
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Volume 14, Issue 1 (Mar 2015)

Issues

Does a Platform Monopolist Want Competition?

Andras Niedermayer
  • Corresponding author
  • Department of Economics, University of Mannheim, L7, 3-5, D-68131 Mannheim, Germany
  • Email:
Published Online: 2016-03-16 | DOI: https://doi.org/10.1515/rne-2015-0006

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.

Keywords: complementary goods; entry; Microsoft; platforms; price commitment; product variety; two-sided markets; vertical integration

JEL: D41; D43; L13; L86

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About the article

Corresponding author: Andras Niedermayer, Department of Economics, University of Mannheim, L7, 3-5, D-68131 Mannheim, Germany, e-mail:


Published Online: 2016-03-16

Published in Print: 2015-03-01



Citation Information: Review of Network Economics, ISSN (Online) 1446-9022, ISSN (Print) 2194-5993, DOI: https://doi.org/10.1515/rne-2015-0006. Export Citation

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