Compatibility and the Product Life Cycle in Two-Sided Markets

Maruyama Masayoshi () and Yusuke Zennyo
Additional contact information
Maruyama Masayoshi: Kobe University, Graduate School of Business Administration, 2-1 Rokkodai, Nada-ku, Kobe 657-8501, Japan

Review of Network Economics, 2013, vol. 12, issue 2, 131-155

Abstract: We consider a case in which two competing suppliers of hardware devices and content each chooses whether to make its content compatible with the other’s device. Our main result is that the outcome of these choices depends upon whether the firms’ major source of profit lies in the sale of hardware devices or in royalties from the sale of content. If the hardware is the main source of profit then incompatibility is a dominant strategy. If royalties are the main source of profit then compatibility is the dominant strategy. Which of these situations attains is likely to change over the product life cycle. We add to the literature by showing the equilibrium structure of compatibility in a two-sided market.

Keywords: compatibility; platform; product life cycle; two-sided markets; JEL Classification: D43; L13; L14; L15; L22 (search for similar items in EconPapers)
Date: 2013
References: Add references at CitEc
Citations: View citations in EconPapers (11)

Downloads: (external link)
https://doi.org/10.1515/rne-2013-0011 (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.

Related works:
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:bpj:rneart:v:12:y:2013:i:2:p:131-155:n:4

Ordering information: This journal article can be ordered from
https://www.degruyter.com/journal/key/rne/html

DOI: 10.1515/rne-2013-0011

Access Statistics for this article

Review of Network Economics is currently edited by Lukasz Grzybowski

More articles in Review of Network Economics from De Gruyter
Bibliographic data for series maintained by Peter Golla ().