Vertical Integration and Exclusivity in Two-Sided Markets
AbstractThis paper measures the impact of vertically integrated and exclusive software on industry structure and welfare in the sixth-generation of the U.S. videogame industry (2000-2005). I specify and estimate a dynamic model of both consumer demand for hardware and software products, and software demand for hardware platforms. I use estimates to simulate market outcomes had platforms been unable to own or contract exclusively with software. Driven by increased software compatibility, hardware and software sales would have increased by 7% and 58% and consumer welfare by $1.5B. Gains would be realized only by the incumbent, suggesting exclusivity favored the entrant platforms.
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Bibliographic InfoPaper provided by NET Institute in its series Working Papers with number 07-39.
Length: 40 pages
Date of creation: Oct 2007
Date of revision: Aug 2012
Contact details of provider:
Web page: http://www.NETinst.org/
platform competition; two-sided markets; vertical integration; exclusive contracting; dynamic demand; estimation of network effects; videogame industry;
Find related papers by JEL classification:
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
- L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
- L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-10-27 (All new papers)
- NEP-COM-2007-10-27 (Industrial Competition)
- NEP-CSE-2007-10-27 (Economics of Strategic Management)
- NEP-MIC-2007-10-27 (Microeconomics)
- NEP-NET-2007-10-27 (Network Economics)
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