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Creating platforms by hosting rivals

Andrei Hagiu, Bruno Jullien () and Julian Wright ()

No 18-970, TSE Working Papers from Toulouse School of Economics (TSE)

Abstract: We explore conditions under which a multiproduct firm can profitably turn itself into a platform by "hosting rivals", i.e. by inviting rivals to sell products or services on top of its core product. Hosting eliminates the additional shopping costs to consumers of buying a specialist rival's competing version of the multiproduct firm's non-core product. On the one hand, this makes it easier for the rival to compete on the non-core product. On the other hand, hosting turns the rival from a pure competitor into a complementor: the value added by its product now helps raise consumer demand for the multi-product firm's core product. As a result, hosting can be both unilaterally profitable for the multi-product firm and jointly profitable for both firms.

JEL-codes: D4 L1 L5 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-mic and nep-pay
Date: 2018-11, Revised 2019-03
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