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Supply chains of mobile apps: competition, private labels and bypassing when the app’s quality is co-created

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  • Tatyana Chernonog

    (Bar-Ilan University)

Abstract

This work deals with issues characterizing the mobile app industry. In particular, we focus on an app developer who competes against either a rival app developer or a private label of the distribution platform, and who can bypass the platform’s distribution and billing systems. The innovation of this work lies in considering the co-creation of app quality by the app developer and the distribution platform while using a revenue-sharing contract, which is popular in the mobile app industry. We investigate both tactical equilibrium (the parties’ operational decisions for a given market structure) and strategic equilibrium (for the developer—whether or not to bypass; for the platform—whether or not to discourage bypassing by improving the contract terms). Our research provides answers to the following strategic questions: Is it beneficial for the app developer to bypass the distribution platform and offer the app to users directly in a competitive environment? Is it beneficial for the distribution platform to introduce a private label to compete with the app developer? Can bypassing also be beneficial for the platform and/or the rival developer? In response to these questions, several counter-intuitive results are revealed.

Suggested Citation

  • Tatyana Chernonog, 2024. "Supply chains of mobile apps: competition, private labels and bypassing when the app’s quality is co-created," Annals of Operations Research, Springer, vol. 332(1), pages 859-890, January.
    • Handle: RePEc:spr:annopr:v:332:y:2024:i:1:d:10.1007_s10479-023-05763-y
    DOI: 10.1007/s10479-023-05763-y
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