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Open Versus Closed Platforms

Author

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  • Tåg, Joacim

    () (Research Institute of Industrial Economics (IFN))

Abstract

This paper studies an industry in which firms can choose to provide open or closed platforms. Open platforms, as opposed to closed, are extendable so third-party producers can develop extensions for them. Building on a two-sided market model, I show that firms might prefer to commit to keeping their platforms closed despite the fact that opening the platform is costless and open platforms are more valuable to consumers. The reason is that opening the platform may lead to intensified competition for consumers.

Suggested Citation

  • Tåg, Joacim, 2008. "Open Versus Closed Platforms," Working Paper Series 747, Research Institute of Industrial Economics, revised 28 Aug 2008.
  • Handle: RePEc:hhs:iuiwop:0747
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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.

    More about this item

    Keywords

    Platforms; Software; Two-sided Markets;

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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