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Vertical Integration and Exclusivity in Two-Sided Markets

This paper measures the impact of vertically integrated and exclusive software on industry structure and welfare in the sixth-generation of the U.S. videogame industry (2000-2005). I specify and estimate a dynamic model of both consumer demand for hardware and software products, and software demand for hardware platforms. I use estimates to simulate market outcomes had platforms been unable to own or contract exclusively with software. Driven by increased software compatibility, hardware and software sales would have increased by 7% and 58% and consumer welfare by $1.5B. Gains would be realized only by the incumbent, suggesting exclusivity favored the entrant platforms.

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Paper provided by NET Institute in its series Working Papers with number 07-39.

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Length: 40 pages
Date of creation: Oct 2007
Date of revision: Aug 2012
Handle: RePEc:net:wpaper:0739
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  1. Chamberlain, Gary, 1982. "Multivariate regression models for panel data," Journal of Econometrics, Elsevier, vol. 18(1), pages 5-46, January.
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  8. Kate Ho & Joy Ishii & Ariel Pakes & J. Porter, 2007. "Moment inequalities and their application," CeMMAP working papers CWP16/07, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  9. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, June.
  10. Hanming Fang & Yang Wang, 2010. "Estimating Dynamic Discrete Choice Models with Hyperbolic Discounting, with an Application to Mammography Decisions," NBER Working Papers 16438, National Bureau of Economic Research, Inc.
  11. Andrew Sweeting, 2007. "Dynamic Product Repositioning in Differentiated Product Markets: The Case of Format Switching in the Commercial Radio Industry," NBER Working Papers 13522, National Bureau of Economic Research, Inc.
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  13. repec:rje:randje:v:37:y:2006:3:p:720-737 is not listed on IDEAS
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