An Empirical Model of Mobile App Competition

Abstract

This paper proposes an empirical model of mobile app competition, in which consumers decide downloads and usage time, and apps compete in price and advertising intensity. We estimate the model using data from Google Play in Japan from 2015 to 2017. We demonstrate merger simulation and the analysis of the vertical relation with Google Play. We find that a reduction of the fee imposed by Google Play can increase the price for game apps by inducing the shift of revenue source from advertising to downloads, highlighting the importance of considering two-sidedness and mixed business models.

Keywords: Merger simulation, market definition, SSNIP, antitrust policy, ad-sponsored media, mixed business models, platform transaction fee, app economy

JEL Classification: L11, L13, L41, L86, M13, M21.