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

Christos Genakos, Kai-Uwe Kuhn (k.kuhn@uea.ac.uk) and John van Reenen

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: When will a monopolist have incentives to leverage his market power in a primary market to foreclose competition in a complementary market by degrading compatibility/interoperability of his products with those of her 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 which allows for complements (PCs and servers). Our estimates suggest that there were incentives to reduce interoperability which were particularly strong at the turn of the 21st Century.

Keywords: Foreclosure; anti-trust; demand estimation; interoperability (search for similar items in EconPapers)
JEL-codes: D43 L1 L4 O3 (search for similar items in EconPapers)
Date: 2011-07
New Economics Papers: this item is included in nep-com
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Related works:
Journal Article: Leveraging Monopoly Power by Degrading Interoperability: Theory and Evidence from Computer Markets (2018)
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)
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