Platform Competition and App Development

Doh-Shin Jeon and Patrick Rey

No 19456, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We study the development of apps on competing platforms. We show that competition leads to commissions exceeding those maximizing consumer surplus (and, a fortiori, social welfare) whenever raising one commission reduces rivals' app bases. We relate this finding to economies of scope in app development and, to illustrate it, consider a setting in which some developers can port their apps at no cost: as their proportion increases, app development is progressively choked-off. Fostering platform competition or interoperability may therefore fail to produce the desired results. Within-platform app store competition, together with appropriate access conditions, may constitute a more promising avenue.

Keywords: Platform; competition (search for similar items in EconPapers)
JEL-codes: D21 D43 L13 L22 (search for similar items in EconPapers)
Date: 2024-09
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