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Exclusivity and exclusion on platform Markets

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  • Subhasish M. Chowdhury

    (University of East Anglia)

  • Stephen Martin

    (Purdue University)

Abstract

We examine conditions under which an exclusive license granted by the upstream producer of a component that some consumers regard as essential to one of two potential suppliers of a downstream platform market can make the unlicensed supplier unprofitable, although both firms would be profitable if both were licensed. If downstream varieties are close substitutes, an exclusive license need not be exclusionary. If downstream varieties are highly differentiated, an exclusive license is exclusionary, but it is not in the interest of the upstream firm to grant an exclusive license. For intermediate levels of product differentiation, an exclusive license is exclusionary and maximizes the upstream firm’s payoff.

Suggested Citation

  • Subhasish M. Chowdhury & Stephen Martin, 2017. "Exclusivity and exclusion on platform Markets," Journal of Economics, Springer, vol. 120(2), pages 95-118, March.
    • Handle: RePEc:kap:jeczfn:v:120:y:2017:i:2:d:10.1007_s00712-016-0499-z
    DOI: 10.1007/s00712-016-0499-z
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    8. Saruta, Fuyuki, 2021. "Exclusive contracts and multihoming agents in two-sided markets," MPRA Paper 110070, University Library of Munich, Germany.
    9. David S. Evans & Richard Schmalensee, 2013. "The Antitrust Analysis of Multi-Sided Platform Businesses," NBER Working Papers 18783, National Bureau of Economic Research, Inc.

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    More about this item

    Keywords

    Exclusion; Essential components; Exclusive contract; Platform market;
    All these keywords.

    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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