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Competing Platforms and Third Party Application Developers

Author

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  • Joacim TÅG

    (Research Institute of Industrial Economics (IFN), Stockholm, Sweden)

Abstract

Technology firms often decide between being open or closed to third party application development. Building on a two-sided market model with competing platforms, I show that firms might prefer to restrict third party application development despite the fact that allowing it is free and increases the value of the product to consumers. The reason is that restricting third party application development removes network effects and thereby relaxes competition between platforms. From a social welfare perspective, firms sometimes restrict third party application development even though total welfare would be higher if development was possible.iscussion about five propositions that should be on the agenda of research and implementation for Living Lab founders in the coming years.

Suggested Citation

  • Joacim TÅG, 2009. "Competing Platforms and Third Party Application Developers," Communications & Strategies, IDATE, Com&Strat dept., vol. 1(74), pages 95-116, 2nd quart.
    • Handle: RePEc:idt:journl:cs7405
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    References listed on IDEAS

    as
    1. Jean-Charles Rochet & Jean Tirole, 2003. "Platform Competition in Two-Sided Markets," Journal of the European Economic Association, MIT Press, vol. 1(4), pages 990-1029, June.
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    Cited by:

    1. Dietl, Helmut & Lang, Markus & Lin, Panlang, 2013. "Advertising pricing models in media markets: Lump-sum versus per-consumer charges," Information Economics and Policy, Elsevier, vol. 25(4), pages 257-271.

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    More about this item

    Keywords

    platforms; software; two-sided markets.;
    All these keywords.

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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