Vertical Integration and Exclusivity in Two-Sided Markets

Robin Lee

No 07-39, Working Papers from NET Institute

Abstract: This paper measures the impact of vertically integrated and exclusive software on industry structure and welfare in the sixth-generation of the U.S. videogame industry (2000-2005). I specify and estimate a dynamic model of both consumer demand for hardware and software products, and software demand for hardware platforms. I use estimates to simulate market outcomes had platforms been unable to own or contract exclusively with software. Driven by increased software compatibility, hardware and software sales would have increased by 7% and 58% and consumer welfare by $1.5B. Gains would be realized only by the incumbent, suggesting exclusivity favored the entrant platforms.

Keywords: platform competition; two-sided markets; vertical integration; exclusive contracting; dynamic demand; estimation of network effects; videogame industry (search for similar items in EconPapers)
JEL-codes: C61 L13 L14 L42 L86 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2007-10, Revised 2012-08
New Economics Papers: this item is included in nep-com, nep-cse, nep-mic and nep-net
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Related works:
Journal Article: Vertical Integration and Exclusivity in Platform and Two-Sided Markets (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:net:wpaper:0739

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