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Mobile application pricing

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  • Gans, Joshua S.

Abstract

This paper examines the pricing of mobile applications when application providers can either supply consumers directly or through a mobile platform (such as a smart phone or tablet). It is demonstrated that when platform access (i.e., purchasing a device) takes place in advance of application pricing, a non-trivial unravelling problem exists that rules out selling platform access at a positive price. Consequently, all platform revenues come from sharing application provider revenues. It is demonstrated that several restrictive conditions on application providers, such as most favoured customer clauses, can allow the platform provider to earn more profits and charge a positive access price increasing the likelihood the platform is provided.

Suggested Citation

  • Gans, Joshua S., 2012. "Mobile application pricing," Information Economics and Policy, Elsevier, vol. 24(1), pages 52-59.
    • Handle: RePEc:eee:iepoli:v:24:y:2012:i:1:p:52-59
    DOI: 10.1016/j.infoecopol.2012.01.006
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Gokhan Guven & Eren Inci & Antonio Russo, 2017. "Apparent Competition in Two-Sided Platforms," CESifo Working Paper Series 6660, CESifo.
    2. Ricardo Flores‐Fillol & Alberto Iozzi & Tommaso Valletti, 2018. "Platform pricing and consumer foresight: The case of airports," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 27(4), pages 705-725, October.
    3. Andrei Hagiu & Julian Wright, 2015. "Marketplace or Reseller?," Management Science, INFORMS, vol. 61(1), pages 184-203, January.
    4. Fangchao Xu & Xin Lu & Xiukun Zhao, 2022. "The Implications of Socially Responsible Retailing Platform on Channel Structure Choice and Product Quality Decisions," Sustainability, MDPI, vol. 14(9), pages 1-14, May.
    5. Maximilian Maurice Gail & Phil-Adrian Klotz, 2021. "The Impact of the Agency Model on E-book Prices: Evidence from the UK," MAGKS Papers on Economics 202111, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    6. Francesco Angelini & Corrado Benassi & Massimiliano Castellani, 2021. "Platform competition and willingness to pay in a vertical differentiated two-sided market," Economics Bulletin, AccessEcon, vol. 41(2), pages 772-780.
    7. Miao, Chun-Hui, 2022. "The pricing of ancillary goods when selling on a platform," International Journal of Industrial Organization, Elsevier, vol. 83(C).
    8. Etro, Federico, 2023. "Platform competition with free entry of sellers," International Journal of Industrial Organization, Elsevier, vol. 89(C).
    9. Johnson, Justin P., 2020. "The agency and wholesale models in electronic content markets," International Journal of Industrial Organization, Elsevier, vol. 69(C).
    10. Kawaguchi, Kohei & Kuroda, Toshifumi & Sato, Susumu, 2023. "Relevant markets and market power of mobile apps," Japan and the World Economy, Elsevier, vol. 67(C).
    11. Wismer, Sebastian, 2013. "Intermediated vs. Direct Sales and a No-Discrimination Rule," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79999, Verein für Socialpolitik / German Economic Association.
    12. Babur De los Santos & Matthijs R. Wildenbeest, 2017. "E-book pricing and vertical restraints," Quantitative Marketing and Economics (QME), Springer, vol. 15(2), pages 85-122, June.
    13. Foros, Øystein & Kind, Hans Jarle & Shaffer, Greg, 2015. "Apple's Agency Model and the Role of Resale Price Maintenance," Discussion Papers 2015/32, Norwegian School of Economics, Department of Business and Management Science.
    14. Andre Boik & Kenneth S. Corts, 2016. "The Effects of Platform Most-Favored-Nation Clauses on Competition and Entry," Journal of Law and Economics, University of Chicago Press, vol. 59(1), pages 105-134.
    15. Miao, Chun-Hui, 2016. "Licensing a technology standard," International Journal of Industrial Organization, Elsevier, vol. 47(C), pages 33-61.
    16. Tian, Longmei & Hu, Benyong, 2023. "The impacts of blockchain adoption on pricing and efforts decisions in online game supply chains with information asymmetry," International Journal of Production Economics, Elsevier, vol. 266(C).
    17. Maruyama, Masayoshi & Zennyo, Yusuke, 2020. "Platform most-favored-customer clauses and investment incentives," International Journal of Industrial Organization, Elsevier, vol. 70(C).
    18. Avinadav, Tal & Chernonog, Tatyana & Perlman, Yael, 2015. "The effect of risk sensitivity on a supply chain of mobile applications under a consignment contract with revenue sharing and quality investment," International Journal of Production Economics, Elsevier, vol. 168(C), pages 31-40.
    19. Andrei Hagiu & Julian Wright, 2019. "Controlling vs. Enabling," Management Science, INFORMS, vol. 65(2), pages 577-595, February.
    20. Avinadav, Tal & Chernonog, Tatyana & Perlman, Yael, 2015. "Consignment contract for mobile apps between a single retailer and competitive developers with different risk attitudes," European Journal of Operational Research, Elsevier, vol. 246(3), pages 949-957.
    21. Tatyana Chernonog, 2021. "Strategic information sharing in online retailing under a consignment contract with revenue sharing," Annals of Operations Research, Springer, vol. 300(2), pages 621-641, May.
    22. Loginova, Oksana, 2022. "Branded websites and marketplace selling: Competing during COVID-19," Journal of Economic Behavior & Organization, Elsevier, vol. 203(C), pages 577-592.
    23. Oystein Foros & Hans Jarle Kind & Greg Shaffer, 2013. "Turning the Page on Business Formats for Digital Platforms: Does Apple's Agency Model Soften Competition?," CESifo Working Paper Series 4362, CESifo.

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    More about this item

    Keywords

    Platform; Two-sided markets; Complements; Most favoured customer clause;
    All these keywords.

    JEL classification:

    • L17 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Open Source Products and Markets
    • L32 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Enterprises; Public-Private Enterprises

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