Open Versus Closed Platforms

Joacim Tåg

No 747, Working Paper Series from Research Institute of Industrial Economics

Abstract: This paper studies an industry in which firms can choose to provide open or closed platforms. Open platforms, as opposed to closed, are extendable so third-party producers can develop extensions for them. Building on a two-sided market model, I show that firms might prefer to commit to keeping their platforms closed despite the fact that opening the platform is costless and open platforms are more valuable to consumers. The reason is that opening the platform may lead to intensified competition for consumers.

Keywords: Platforms; Software; Two-sided Markets (search for similar items in EconPapers)
JEL-codes: D40 D42 D43 L10 L12 L13 L14 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-ipr, nep-mic, nep-mkt and nep-net
Date: 2008-04-12, Revised 2008-08-28

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Persistent link: http://EconPapers.repec.org/RePEc:hhs:iuiwop:0747

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