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An Economic Analysis of Platform Sharing

In: Organizational Innovation and Firm Performance

Author

Listed:
  • Arghya Ghosh
  • Hodaka Morita

Abstract

We explore the managerial implications and economic consequences of platform sharing under models of horizontal and vertical product differentiation. By using a common platform across different products, firms can save on fixed costs for platform development. At the same time, platform sharing imposes restrictions on firms' ability to differentiate their products, and this reduces their profitability. It might appear that platform sharing across firms makes consumers worse off because firms cooperate in their product development processes to maximize their joint profit. We find, however, that platform sharing across firms benefits consumers in our framework because it intensifies competition in our horizontal differentiation model, and because it increases the quality of the lower-end product in our vertical differentiation model. We also show new channels through which a merger makes consumers worse off in the presence of platform sharing.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Arghya Ghosh & Hodaka Morita, 2008. "An Economic Analysis of Platform Sharing," NBER Chapters, in: Organizational Innovation and Firm Performance, pages 164-186, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberch:12172
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    Cited by:

    1. Ke Ding & Jiutang Pan, 2014. "The shanzhai cell phone: platforms and small business dynamics," Chapters, in: Mariko Watanabe (ed.), The Disintegration of Production, chapter 4, pages 101-126, Edward Elgar Publishing.
    2. Ding, Ke, 2013. "Platforms and firm capabilities : a study of emerging global value chains," IDE Discussion Papers 432, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    3. Bourreau, Marc & Dogan, PInar, 2010. "Cooperation in product development and process R&D between competitors," International Journal of Industrial Organization, Elsevier, vol. 28(2), pages 176-190, March.
    4. Mariko Watanabe, 2014. "An analytical framework for the vigorous entry and low price phenomenon," Chapters, in: Mariko Watanabe (ed.), The Disintegration of Production, chapter 1, pages 26-48, Edward Elgar Publishing.
    5. Zhitang Li & Cuihua Zhang & Ruxia Lyu, 2025. "The developer’s optimal distribution strategy in the differentiated platform: the value of user feedback data and negotiation," Electronic Commerce Research, Springer, vol. 25(1), pages 553-593, February.
    6. Jabbour, Chady & Rey-Valette, Hélène & Maurel, Pierre & Salles, Jean-Michel, 2019. "Spatial data infrastructure management: A two-sided market approach for strategic reflections," International Journal of Information Management, Elsevier, vol. 45(C), pages 69-82.
    7. Zhitang Li & Cuihua Zhang & Ruxia Lyu & Yong Ma, 2024. "The optimal encroachment strategy of private-label considering the quality effort and platform’s e-word-of-mouth," Electronic Commerce Research, Springer, vol. 24(3), pages 1681-1712, September.
    8. Huo, Jingjing, 2015. "How Nations Innovate: The Political Economy of Technological Innovation in Affluent Capitalist Economies," OUP Catalogue, Oxford University Press, number 9780198735847.
    9. Jost, Peter-J. & Süsser, Theresa, 2020. "Company-customer interaction in mass customization," International Journal of Production Economics, Elsevier, vol. 220(C).

    More about this item

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • M20 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - General

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