Platform Standards, Collusin and Quality Incentives

Claudia Salim

No 257, Discussion Papers from SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich

Abstract: This paper examines how quality incentives are related to the interoperability of competing plat- forms. Platforms choose whether to operate standardised or exclusively, prior to quality and subsequent price competition. We find that platforms choose a common standard if they can coordinate their quality provision. The actual investment then depends on the cost of quality provision: If rather high, platforms refrain from investment; if rather low, platforms maintain vertically differentiated platforms. The latter case is socially more desirable than exclusivity where platforms do not invest. Nevertheless, quality competition of standardised platforms in- duces the highest investment and maximum welfare.

Keywords: two-sided markets; standards; investment in transaction quality (search for similar items in EconPapers)
JEL-codes: D43 D62 L13 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com and nep-net
Date: 2009-02
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