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Platform Competition and App Development

Author

Listed:
  • Jeon, Doh-Shin
  • Rey, Patrick

Abstract

We study the development of apps on competing platforms. We show that competition leads to commissions exceeding those maximizing consumer surplus (and, a fortiori, social welfare) whenever raising one commission reduces rivals' app bases. We relate this finding to economies of scope in app development and, to illustrate it, consider a setting in which some developers can port their apps at no cost: as their proportion increases, app development is progressively choked-off. Fostering platform competition or interoperability may therefore fail to produce the desired results. Within-platform app store competition, together with appropriate access conditions, may constitute a more promising avenue.

Suggested Citation

  • Jeon, Doh-Shin & Rey, Patrick, 2024. "Platform Competition and App Development," CEPR Discussion Papers 19456, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:19456
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    File URL: https://cepr.org/publications/DP19456
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    Keywords

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    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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