Vertical Integration and Exclusivity in Platform and Two-Sided Markets

Robin Lee

American Economic Review, 2013, vol. 103, issue 7, 2960-3000

Abstract: This paper measures the impact of vertically integrated and exclusive software on industry structure and welfare in the sixth-generation of the US video game 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 percent and 58 percent and consumer welfare by $1.5 billion. Gains would be realized only by the incumbent, suggesting exclusivity favored the entrant platforms.

JEL-codes: D12 L13 L22 L63 L86 (search for similar items in EconPapers)
Date: 2013
Note: DOI: 10.1257/aer.103.7.2960
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Citations: View citations in EconPapers (202)

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Working Paper: Vertical Integration and Exclusivity in Two-Sided Markets (2012)
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