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Exclusivity and exclusion on platform Markets

Author

Listed:
  • Subhasish M. Chowdhury

    (University of East Anglia)

  • Stephen Martin

    (Purdue University)

Abstract

We examine conditions under which an exclusive license granted by the upstream producer of a component that some consumers regard as essential to one of two potential suppliers of a downstream platform market can make the unlicensed supplier unprofitable, although both firms would be profitable if both were licensed. If downstream varieties are close substitutes, an exclusive license need not be exclusionary. If downstream varieties are highly differentiated, an exclusive license is exclusionary, but it is not in the interest of the upstream firm to grant an exclusive license. For intermediate levels of product differentiation, an exclusive license is exclusionary and maximizes the upstream firm’s payoff.

Suggested Citation

  • Subhasish M. Chowdhury & Stephen Martin, 2017. "Exclusivity and exclusion on platform Markets," Journal of Economics, Springer, vol. 120(2), pages 95-118, March.
    • Handle: RePEc:kap:jeczfn:v:120:y:2017:i:2:d:10.1007_s00712-016-0499-z
    DOI: 10.1007/s00712-016-0499-z
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    Cited by:

    1. Bruno Jullien & Alessandro Pavan & Marc Rysman, 2021. "Two-sided markets, pricing, and network effects," Post-Print hal-03828345, HAL.
    2. Jihui Chen & Qiang Fu, 2017. "Do exclusivity arrangements harm consumers?," Journal of Regulatory Economics, Springer, vol. 51(3), pages 311-339, June.
    3. Juan Manuel Sánchez-Cartas, 2021. "Intellectual property and taxation of digital platforms," Journal of Economics, Springer, vol. 132(3), pages 197-221, April.
    4. Kim, Nayeong & Lee, Dongmin & Cho, Seonghwan & Moon, Junghoon, 2023. "The effect of exclusive distribution on the sales of ready-made meals in online retail," Journal of Retailing and Consumer Services, Elsevier, vol. 75(C).
    5. David S. Evans & Richard Schmalensee, 2013. "The Antitrust Analysis of Multi-Sided Platform Businesses," NBER Working Papers 18783, National Bureau of Economic Research, Inc.
    6. Lu, Qiuyu, 2022. "Content Licensing with Endogenous Homing," MPRA Paper 115314, University Library of Munich, Germany.
    7. Jihui Chen, 2011. "Do Exclusivity Arrangments Harm Consumers?," Working Paper Series 20111001, Illinois State University, Department of Economics.
    8. Fuyuki Saruta, 2022. "Exclusive Contracts and Multihoming Agents in Two-sided Markets," Discussion Paper Series DP2022-26, Research Institute for Economics & Business Administration, Kobe University.
    9. Heywood, John S. & Luo, Qiming & Ye, Guangliang, 2023. "Spatial price discrimination with a ‘must-have’ component," Regional Science and Urban Economics, Elsevier, vol. 103(C).
    10. Saruta, Fuyuki, 2021. "Exclusive contracts and multihoming agents in two-sided markets," MPRA Paper 110070, University Library of Munich, Germany.

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    More about this item

    Keywords

    Exclusion; Essential components; Exclusive contract; Platform market;
    All these keywords.

    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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