Leveraging Monopoly Power by Degrading Interoperability: Theory and evidence from computer markets

Kühn, Kai-Uwe, John van Reenen and Christos Genakos

No 8502, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: When will a monopolist have incentives to foreclose a complementary market by degrading compatibility/interoperability of his products with those of 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 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: 2011-08
New Economics Papers: this item is included in nep-com and nep-ind
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://cepr.org/publications/DP8502 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

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)
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:cpr:ceprdp:8502

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP8502

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().