Vertical Integration and Exclusivity in Platform and Two-Sided Markets

46 Pages Posted: 23 Oct 2007 Last revised: 19 Oct 2016

See all articles by Robin S. Lee

Robin S. Lee

Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: 2013

Abstract

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.

Keywords: platform competition, two-sided markets, vertical integration, exclusive contracting, dynamic demand, estimation of network e

JEL Classification: C61, L13, L14, L42, L86

Suggested Citation

Lee, Robin S., Vertical Integration and Exclusivity in Platform and Two-Sided Markets (2013). American Economic Review, Vol. 103, No. 7, 2013. Available at SSRN: https://ssrn.com/abstract=1022682 or http://dx.doi.org/10.2139/ssrn.1022682

Robin S. Lee (Contact Author)

Harvard University - Department of Economics ( email )

1805 Cambridge St.
Cambridge, MA 02138
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
172
Abstract Views
3,441
rank
171,764
PlumX Metrics