Superstars in Two-Sided Markets: Exclusives or Not?
28 Pages Posted: 24 Sep 2018 Last revised: 27 Feb 2019
Date Written: February 24, 2019
This article studies incentives for a premium provider (Superstar) to offer exclusive contracts to competing platforms mediating the interactions between consumers and firms. When platform competition is intense, more consumers subscribe to the platform hosting the Superstar exclusively. This mechanism is self-reinforcing as firms follow consumer decisions and (some) join exclusively the platform with the Superstar. Exclusivity always benefits firms and may benefit consumers. Moreover, when the Superstar is integrated with a platform, non-exclusivity becomes more likely than if the Superstar was independent. This analysis provides several implications for managers and policy makers operating in digital and traditional markets.
Keywords: exclusive contracts, platforms, two-sided markets, ripple effect, content providers, market power.
JEL Classification: L13, L22, L86
Suggested Citation: Suggested Citation