Platform competition, compatibility, and social efficiency
By: Ramon Casadesus-Masanell and Francisco Ruiz-Aliseda
Contributors: Ruiz-Aliseda, Francisco; Harvard Business School
Edition: Rev.
Series: Working paper / Harvard Business School -- 09-058; Working paper (Harvard Business School) -- 09-058.
Publisher: Harvard Business School]
Published: 2009
Place of publication: [Boston
Language: eng
Number of pages: 51
Description: Katz and Shapiro (1985) study systems compatibility in settings with one-sided plat- forms and direct network effects. We consider systems compatibility in settings with two-sided platforms and indirect network effects to develop an explanation why markets with two-sided platforms are often characterized by incompatibility with one dominant player who may subsidize access to one side of the market. We find that incompatibility gives rise to asymmetric equilibria with a dominant platform that earns more than under compatibility. We also find that incompatibility generates larger total welfare than compatibility when horizontal differences between platforms are small.
Notes: "October 2008, revised November 2009"--Publisher's web site.

Includes bibliographical references.