Vertical Integration and Exclusivity in Platform and Two-Sided Markets
AbstractThis paper measures the impact of vertically integrated and exclusive software on industry structure and welfare in the sixth-generation of the US video game 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 percent and 58 percent and consumer welfare by $1.5 billion. Gains would be realized only by the incumbent, suggesting exclusivity favored the entrant platforms.
CitationLee, Robin S. 2013. "Vertical Integration and Exclusivity in Platform and Two-Sided Markets." American Economic Review, 103 (7): 2960-3000. DOI: 10.1257/aer.103.7.2960
- D12 Consumer Economics: Empirical Analysis
- L13 Oligopoly and Other Imperfect Markets
- L22 Firm Organization and Market Structure
- L63 Microelectronics; Computers; Communications Equipment
- L86 Information and Internet Services; Computer Software