An Economic Analysis of Platform Sharing
AbstractWe explore the managerial implications and economic consequences of platform sharing under models of horizontal and vertical product differentiation. By using a common platform across different products, firms can save on fixed costs for platform development. At the same time, platform sharing imposes restrictions on firms' ability to differentiate their products, and this reduces their profitability. It might appear that platform sharing across firms makes consumers worse off because firms cooperate in their product development processes to maximize their joint profit. We find, however, that platform sharing across firms benefits consumers in our framework because it intensifies competition in our horizontal differentiation model, and because it increases the quality of the lower-end product in our vertical differentiation model. We also show new channels through which a merger makes consumers worse off in the presence of platform sharing.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13058.
Date of creation: Apr 2007
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Publication status: published as Arghya Ghosh, Hodaka Morita. "An economic analysis of platform sharing," in George Baker, Takeo Hoshi, Hideshi Itoh, and Sadao Nagaoka, organizers, "Organizational Innovation and Firm Performance" Journal of the Japanese and International Economies 22(2), June 2008 (Elsevier Inc.) (2008)
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Other versions of this item:
- Arghya Ghosh & Hodaka Morita, 2008. "An economic analysis of platform sharing," NBER Chapters, in: Organizational Innovation and Firm Performance, pages 164-186 National Bureau of Economic Research, Inc.
- Ghosh, Arghya & Morita, Hodaka, 2008. "An economic analysis of platform sharing," Journal of the Japanese and International Economies, Elsevier, vol. 22(2), pages 164-186, June.
- D40 - Microeconomics - - Market Structure and Pricing - - - General
- L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
- L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
- M20 - Business Administration and Business Economics; Marketing; Accounting - - Business Economics - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-05-12 (All new papers)
- NEP-BEC-2007-05-12 (Business Economics)
- NEP-COM-2007-05-12 (Industrial Competition)
- NEP-NET-2007-05-12 (Network Economics)
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