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Platform Competition With ‘Must‐Have’ Components

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  • CHRISTIAAN HOGENDORN
  • STEPHEN KA YAT YUEN

Abstract

In platform‐component systems with indirect network effects, some ‘must‐have’ components are so popular with consumers that they create large, discrete indirect network effects when they become available on a platform. For example, ESPN is a must‐have component of cable TV platforms. This paper examines how platform market structures determine exclusive versus non‐exclusive contracts between platforms and components. It shows that a component provider is more likely to sign exclusive contracts with a single platform if its popularity is high, the platform market share difference is large, and cross‐platform indirect network effects are low.

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  • Christiaan Hogendorn & Stephen Ka Yat Yuen, 2009. "Platform Competition With ‘Must‐Have’ Components," Journal of Industrial Economics, Wiley Blackwell, vol. 57(2), pages 294-318, June.
    • Handle: RePEc:bla:jindec:v:57:y:2009:i:2:p:294-318
    DOI: 10.1111/j.1467-6451.2009.00379.x
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    Cited by:

    1. Stennek, Johan, 2014. "Exclusive quality – Why exclusive distribution may benefit the TV-viewers," Information Economics and Policy, Elsevier, vol. 26(C), pages 42-57.
    2. Shim Sunghee & Kwak Juwon, 2015. "Tying to Foreclose in Two-Sided Markets," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 15(4), pages 1919-1937, October.
    3. Peters, Frank, 2018. "The business of video games is a multi-player game : Essays on governance choices and performance in a two-sided market in the cultural industries," Other publications TiSEM 886b3148-4bbb-4ea4-b666-0, Tilburg University, School of Economics and Management.
    4. Subhasish M. Chowdhury & Stephen Martin, 2017. "Exclusivity and exclusion on platform Markets," Journal of Economics, Springer, vol. 120(2), pages 95-118, March.
    5. Evens, Tom, 2010. "Challenging content exclusivity in network industries: the case of digital broadcasting," 21st European Regional ITS Conference, Copenhagen 2010: Telecommunications at new crossroads - Changing value configurations, user roles, and regulation 12, International Telecommunications Society (ITS).
    6. D’Annunzio, Anna, 2017. "Vertical integration in the TV market: Exclusive provision and program quality," International Journal of Industrial Organization, Elsevier, vol. 53(C), pages 114-144.
    7. James E. Prieger & Wei‐Min Hu, 2012. "Applications Barrier To Entry And Exclusive Vertical Contracts In Platform Markets," Economic Inquiry, Western Economic Association International, vol. 50(2), pages 435-452, April.
    8. Rasch, Alexander & Wenzel, Tobias, 2015. "The impact of piracy on prominent and non-prominent software developers," Telecommunications Policy, Elsevier, vol. 39(8), pages 735-744.
    9. I. Robert Chiang & Jhih‐Hua Jhang‐Li, 2020. "Competition through Exclusivity in Digital Content Distribution," Production and Operations Management, Production and Operations Management Society, vol. 29(5), pages 1270-1286, May.
    10. Kim, Suwon, 2018. "Snack-media platform market segmentation based on user heterogeneity: A Q-methodology approach," 22nd ITS Biennial Conference, Seoul 2018. Beyond the boundaries: Challenges for business, policy and society 190357, International Telecommunications Society (ITS).
    11. Juan Manuel Sanchez‐Cartas & Gonzalo León, 2021. "Multisided Platforms And Markets: A Survey Of The Theoretical Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 35(2), pages 452-487, April.
    12. Anna D'Annunzio, 2013. "Vertical Integration in Two-Sided Markets: Exclusive Provision and Program Quality," DIAG Technical Reports 2013-16, Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza".
    13. Subhasish M. Chowdhury & Stephen Martin, 2017. "Exclusivity and exclusion on platform Markets," Journal of Economics, Springer, vol. 120(2), pages 95-118, March.
    14. Akifumi Ishihara & Ryoko Oki, 2021. "Exclusive content in two‐sided markets," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 30(3), pages 638-654, August.

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    More about this item

    JEL classification:

    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media

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