Competing Platforms and Third Party Application Developers

Communication & Strategies, Vol. 74, pp. 95-114, 2009

Posted: 13 Aug 2009

See all articles by Joacim Tåg

Joacim Tåg

Research Institute of Industrial Economics (IFN)

Multiple version iconThere are 4 versions of this paper

Date Written: 2009

Abstract

Technology firms often decide between being open or closed to third party application development. Building on a two-sided market model with competing platforms, I show that firms might prefer to restrict third party application development despite the fact that allowing it is free and increases the value of the product to consumers. The reason is that restricting third party application development removes network effects and thereby relaxes competition between platforms. From a social welfare perspective, firms sometimes restrict third party application development even through total welfare would be higher if development was possible.

Keywords: platforms, software, two-sided markets

JEL Classification: D4, D42, D43, L1, L12, L13, L14

Suggested Citation

Tåg, Joacim, Competing Platforms and Third Party Application Developers (2009). Communication & Strategies, Vol. 74, pp. 95-114, 2009. Available at SSRN: https://ssrn.com/abstract=1447274

Joacim Tåg (Contact Author)

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

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