The Competitive Effects of Vertical Integration in Platform Markets

Jerome Pouyet and Trégouët, Thomas
Authors registered in the RePEc Author Service: Thomas Tregouet

No 17681, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We analyze vertical integration between platforms providing operating systems to manufacturers of devices when there are indirect network effects between buyers of devices and developers of applications. Vertical integration creates market power over developers, and over non-integrated manufacturers but only under certain circumstances. That market power enables to coordinate pricing decisions across both sides of the market, which leads to a better internalization of network effects. Vertical integration does not systematically lead to foreclosure and can benefit all parties, even in the absence of efficiency gains. Its competitive impact depends on the strength and the structure of indirect network effects.

Keywords: Vertical integration; Platform markets; Network effects; Foreclosure (search for similar items in EconPapers)
JEL-codes: D43 L10 L40 (search for similar items in EconPapers)
Date: 2022-11
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Related works:
Working Paper: The Competitive Effects of Vertical Integration in Platform Markets (2023)
Working Paper: The Competitive Effects of Vertical Integration in Platform Markets (2021)
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