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Platform Standards, Collusion and Quality Incentives

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  • Salim, Claudia

Abstract

This paper examines how quality incentives are related to the interoperability of competing platforms. Platforms choose whether to operate standardised or exclusively, prior to quality and subsequent price competition. We find that platforms choose a common standard if they can coordinate their quality provision. The actual investment then depends on the cost of quality provision: If rather high, platforms refrain from investment; if rather low, platforms maintain vertically differentiated platforms. The latter case is socially more desirable than exclusivity where platforms do not invest. Nevertheless, quality competition of standardised platforms induces the highest investment and maximum welfare.

Suggested Citation

  • Salim, Claudia, 2009. "Platform Standards, Collusion and Quality Incentives," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 257, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  • Handle: RePEc:trf:wpaper:257
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    File URL: https://epub.ub.uni-muenchen.de/13295/1/257.pdf
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    References listed on IDEAS

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    Keywords

    two-sided markets; standards; investment in transaction quality;

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