PLATFORM COMPETITION WITH ‘MUST‐HAVE’ COMPONENTS*

Christiaan Hogendorn () and Stephen Ka Yat Yuen

Journal of Industrial Economics, 2009, vol. 57, issue 2, 294-318

Abstract: In platform‐component systems with indirect network effects, some ‘must‐have’ components are so popular with consumers that they create large, discrete indirect network effects when they become available on a platform. For example, ESPN is a must‐have component of cable TV platforms. This paper examines how platform market structures determine exclusive versus non‐exclusive contracts between platforms and components. It shows that a component provider is more likely to sign exclusive contracts with a single platform if its popularity is high, the platform market share difference is large, and cross‐platform indirect network effects are low.

Date: 2009
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https://doi.org/10.1111/j.1467-6451.2009.00379.x

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Working Paper: Platform Competition with “Must-Have” Components (2004)
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