Pricing strategies in software platforms : video consoles vs. operating systems
AbstractWe study software platforms for which the total amount that users spend depends on the twosided pricing strategy of the platform firm, and on the pricing strategy of application developers. When setting prices, developers may be constrained by one of two margins: the demand margin and the competition margin. By analyzing how these margins affect pricing strategies we find some conditions which explain features of the market of operating systems and its differences with the one corresponding to the video consoles. The problem that arises when the platform does not set prices (as an open platform) is considered. We show that policy makers should promote open source in operating systems platforms but not necessarily in video consoles. We also analyze the incentives for a platform to integrate with applications as a function of the extent of substitutability among them and provide a possible explanation for the observed fact of vertical disintegration in these industries.
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Bibliographic InfoPaper provided by Universidad Carlos III, Departamento de Economía in its series Economics Working Papers with number we074823.
Date of creation: May 2007
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-06-02 (All new papers)
- NEP-COM-2007-06-02 (Industrial Competition)
- NEP-IPR-2007-06-02 (Intellectual Property Rights)
- NEP-MIC-2007-06-02 (Microeconomics)
- NEP-NET-2007-06-02 (Network Economics)
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