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Application compatibility and affiliation in two-sided markets

Author

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  • Maruyama, Masayoshi
  • Zennyo, Yusuke

Abstract

This paper analyzes the unilateral choices of application compatibility by platforms and the endogenous affiliations of two different groups (content providers and users). We find a novel result that for both platforms to unilaterally choose application compatibility is not an equilibrium unless the cost for achieving application compatibility is zero. We also find that asymmetric equilibria exist with regard to other content, where one platform chooses incompatibility while the other platform chooses compatibility and that, these asymmetric equilibria are harmful both to the content providers and to users, compared to the (out-of-equilibrium) outcome where both platforms choose application compatibility.

Suggested Citation

  • Maruyama, Masayoshi & Zennyo, Yusuke, 2015. "Application compatibility and affiliation in two-sided markets," Economics Letters, Elsevier, vol. 130(C), pages 39-42.
  • Handle: RePEc:eee:ecolet:v:130:y:2015:i:c:p:39-42
    DOI: 10.1016/j.econlet.2015.02.019
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    References listed on IDEAS

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    1. Doganoglu, Toker & Wright, Julian, 2006. "Multihoming and compatibility," International Journal of Industrial Organization, Elsevier, vol. 24(1), pages 45-67, January.
    2. Ramon Casadesus-Masanell & Francisco Ruiz-Aliseda, 2008. "Platform Competition, Compatibility, and Social Efficiency," Working Papers 08-32, NET Institute.
    3. María Fernanda Viecens, 2009. "Compatibility with Firm Dominance," Working Papers 2009-12, FEDEA.
    4. Rasch, Alexander & Wenzel, Tobias, 2014. "Content provision and compatibility in a platform market," Economics Letters, Elsevier, vol. 124(3), pages 478-481.
    5. Viecens María Fernanda, 2011. "Compatibility with Firm Dominance," Review of Network Economics, De Gruyter, vol. 10(4), pages 1-27, December.
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    1. repec:eee:iepoli:v:40:y:2017:i:c:p:1-12 is not listed on IDEAS

    More about this item

    Keywords

    Compatibility; Application; Affiliation; Platform; Two-sided markets;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • 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
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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