Leveraging monopoly power by degrading interoperability: theory and evidence from computer markets

Christos Genakos, Kai Uwe Kühn and John van Reenen

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

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)
Pages: 32 pages
Date: 2011-07-01
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http://eprints.lse.ac.uk/121708/ Open access version. (application/pdf)

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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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:121708

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