Private firms may not have efficient incentives to allow third-party producers to access their platform or develop extensions for their products. Based on a two-sided market model, I discuss two reasons for why. First, a private firm may not be able to internalize all benefits from cross-group externalities arising with third-party extensions. Second, firms may have strategic incentives to shut out third-parties because it relaxes competition.
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Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number
748.
Length: 16 pages Date of creation: 28 Apr 2008 Date of revision: Handle: RePEc:hhs:iuiwop:0748
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