Does a Platform Monopolist Want Competition?

Andras Niedermayer

Diskussionsschriften from Universitaet Bern, Departement Volkswirtschaft

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 diversity 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: Platforms; entry; complementary goods; price commitment; product diversity; Microsoft; vertical integration; two-sided markets (search for similar items in EconPapers)
JEL-codes: D41 D43 L13 L86 (search for similar items in EconPapers)
Date: 2006-12
New Economics Papers: this item is included in nep-bec, nep-com, nep-mic and nep-net
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://repec.vwiit.ch/dp/dp0604.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ube:dpvwib:dp0604

Access Statistics for this paper

More papers in Diskussionsschriften from Universitaet Bern, Departement Volkswirtschaft Contact information at EDIRC.
Bibliographic data for series maintained by Franz Koelliker ().