Leveraging Monopoly Power by Degrading Interoperability: Theory and Evidence from Computer Markets

Christos Genakos, Kai‐Uwe Kühn and John van Reenen

Economica, 2018, vol. 85, issue 340, 873-902

Abstract: When will a monopolist have incentives to leverage her/his market power in a primary market to foreclose competition in a complementary market by degrading compatibility/interoperability of her/his products with those of her/his rivals? We develop a framework where leveraging extracts more rents from the monopoly market by ‘restoring’ second‐degree price discrimination. In a random coefficient model with complements, we derive a policy test for when incentives to reduce rival quality will hold. Our application is to Microsoft's alleged strategic incentives to leverage market power from personal computer to server operating systems. We estimate a structural random coefficients demand system that allows for complements (personal computers and servers). Our estimates suggest that there were incentives to reduce interoperability that were particularly strong at the turn of the 21st century.

Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://doi.org/10.1111/ecca.12257

Related works:
Working Paper: Leveraging Monopoly Power by Degrading Interoperability: Theory and Evidence from Computer Markets (2011)
Working Paper: Leveraging Monopoly Power by Degrading Interoperability: Theory and evidence from computer markets (2011)
Working Paper: Leveraging monopoly power by degrading interoperability: theory and evidence from computer markets (2011)
Working Paper: Leveraging Monopoly Power by Degrading Interoperability: Theory and Evidence from Computer Markets (2011)
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:bla:econom:v:85:y:2018:i:340:p:873-902

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0013-0427

Access Statistics for this article

Economica is currently edited by Frank Cowell, Tore Ellingsen and Alan Manning

More articles in Economica from London School of Economics and Political Science Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().