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Platform Design and Innovation Incentives: Evidence from the Product Rating System on Apple's App Store

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  • Benjamin T. Leyden

Abstract

I study how the aggregation of product ratings on digital platforms affects the strategic behavior of third-party firms. Leveraging an unexpected and exogenous change in the rating system on Apple’s App Store marketplace, I find that for nearly a decade, the manner in which the App Store aggregated customer ratings discouraged product updating by developers. Additionally, developers who were more reliant on the rating system were more responsive to the incentives created by this policy. Last, I provide suggestive evidence that the policy led to a decrease in developer effort on the platform.

Suggested Citation

  • Benjamin T. Leyden, 2021. "Platform Design and Innovation Incentives: Evidence from the Product Rating System on Apple's App Store," CESifo Working Paper Series 9113, CESifo.
    • Handle: RePEc:ces:ceswps:_9113
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    Cited by:

    1. Xuan Teng, 2022. "Self-Preferencing, Quality Provision, and Welfare in Mobile Application Markets," CESifo Working Paper Series 10042, CESifo.
    2. Luis Aguiar & Imke Reimers & Joel Waldfogel, 2024. "Platforms and the transformation of the content industries," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 33(2), pages 317-326, March.

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    More about this item

    Keywords

    reputation systems; online platforms; product innovation;
    All these keywords.

    JEL classification:

    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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