Platform Competition, Compatibility, and Social Efficiency

53 Pages Posted: 29 Jul 2009 Last revised: 12 Nov 2009

See all articles by Ramon Casadesus-Masanell

Ramon Casadesus-Masanell

Harvard University - Strategy Unit

Francisco Ruiz-Aliseda

Pontifical Catholic University of Chile

Multiple version iconThere are 2 versions of this paper

Date Written: June 1, 2009

Abstract

Katz and Shapiro (1985) study systems compatibility in settings with one-sided platforms and direct network externalities. We consider systems compatibility in settings with two-sided platforms and indirect network externalities 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.

Keywords: network, industries, platforms, markets

Suggested Citation

Casadesus-Masanell, Ramon and Ruiz-Aliseda, Francisco, Platform Competition, Compatibility, and Social Efficiency (June 1, 2009). IESE Business School Working Paper No. 798; Harvard Business School Research Paper No. 09-058. Available at SSRN: https://ssrn.com/abstract=1440150 or http://dx.doi.org/10.2139/ssrn.1440150

Ramon Casadesus-Masanell (Contact Author)

Harvard University - Strategy Unit ( email )

Harvard Business School
Soldiers Field Road
Boston, MA 02163
United States
617-496-0176 (Phone)
617-496-5859 (Fax)

HOME PAGE: http://www.people.hbs.edu/rmasanell

Francisco Ruiz-Aliseda

Pontifical Catholic University of Chile ( email )

Vicuna Mackenna 4860
Santiago, 99999
Chile

Register to save articles to
your library

Register

Paper statistics

Downloads
147
Abstract Views
842
rank
67,657
PlumX Metrics