The Competitive Effects of Vertical Integration in Platform Markets

Jerome Pouyet and Thomas Tregouet

Working Papers from HAL

Abstract: We analyze vertical integration in a setting where, first, platforms compete to provide an operating system to manufacturers of devices and attract developers of applications, and, second, 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: platform markets; network effects; foreclosure; vertical integration (search for similar items in EconPapers)
Date: 2023-11-01
New Economics Papers: this item is included in nep-com, nep-gth, nep-ind, nep-isf, nep-pay and nep-reg
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Related works:
Working Paper: The Competitive Effects of Vertical Integration in Platform Markets (2022)
Working Paper: The Competitive Effects of Vertical Integration in Platform Markets (2021)
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