First-Party Complements in Platform Markets: The Role of Competition

Alexey Rusakov and Tobias Kretschmer

No 19687, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: First-party complements both create and capture value in platform markets. Which of these motives dominates depends on the platform’s competitive position on the user and the complementor side. We posit that platform owners release more first-party complements in product categories with a high share of users compared to competing platforms. Conversely, platform owners release more first-party complements if the platform is in a weak competitive position in terms of its complements. This suggests that platforms release first-party complements to create value if they are weak on the complementor side, and to capture value if they are strong on the user side. Using data from video game consoles, we find our hypotheses confirmed and integrate competition between platforms with competition between first-party and third-party complements.

JEL-codes: L22 L24 L82 L86 (search for similar items in EconPapers)
Date: 2024-11
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