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Mobile application pricing

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Author Info

  • Gans, Joshua S.

Abstract

This paper examines the pricing of mobile applications when application providers can either supply consumers directly or through a mobile platform (such as a smart phone or tablet). It is demonstrated that when platform access (i.e., purchasing a device) takes place in advance of application pricing, a non-trivial unravelling problem exists that rules out selling platform access at a positive price. Consequently, all platform revenues come from sharing application provider revenues. It is demonstrated that several restrictive conditions on application providers, such as most favoured customer clauses, can allow the platform provider to earn more profits and charge a positive access price increasing the likelihood the platform is provided.

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Bibliographic Info

Article provided by Elsevier in its journal Information Economics and Policy.

Volume (Year): 24 (2012)
Issue (Month): 1 ()
Pages: 52-59

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Handle: RePEc:eee:iepoli:v:24:y:2012:i:1:p:52-59

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Web page: http://www.elsevier.com/locate/inca/505549

Related research

Keywords: Platform; Two-sided markets; Complements; Most favoured customer clause;

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References

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  1. Oliver Hart & John Moore, 1988. "Property Rights and the Nature of the Firm," Working papers 495, Massachusetts Institute of Technology (MIT), Department of Economics.
  2. Andrei Hagiu, 2009. "Two-Sided Platforms: Product Variety and Pricing Structures," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 18(4), pages 1011-1043, December.
  3. Dennis W. Carlton & Joshua S. Gans & Michael Waldman, 2010. "Why Tie a Product Consumers Do Not Use?," American Economic Journal: Microeconomics, American Economic Association, vol. 2(3), pages 85-105, August.
  4. Hermalin, Benjamin E. & Katz, Michael L., 2007. "The economics of product-line restrictions with an application to the network neutrality debate," Information Economics and Policy, Elsevier, vol. 19(2), pages 215-248, June.
  5. Grout, Paul A, 1984. "Investment and Wages in the Absence of Binding Contracts: A Nash Bargining Approach," Econometrica, Econometric Society, vol. 52(2), pages 449-60, March.
  6. Dennis W. Carlton & Michael Waldman, 2001. "Competition, Monopoly, and Aftermarkets," NBER Working Papers 8086, National Bureau of Economic Research, Inc.
  7. repec:reg:wpaper:541 is not listed on IDEAS
  8. Anderson, Simon P. & Gans, Joshua, 2010. "Platform Siphoning: Ad-Avoidance and Media Content," CEPR Discussion Papers 7729, C.E.P.R. Discussion Papers.
  9. Gans, Joshua S., 2011. "Remedies for tying in computer applications," International Journal of Industrial Organization, Elsevier, vol. 29(5), pages 505-512, September.
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Cited by:
  1. Oystein Foros & Hans Jarle Kind & Greg Shaffer, 2013. "Turning the Page on Business Formats for Digital Platforms: Does Apple's Agency Model Soften Competition?," CESifo Working Paper Series 4362, CESifo Group Munich.

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