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Platform Design and Innovation Incentives: Evidence from the Product Rating System on Apple's App Store

Author

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  • Benjamin T. Leyden

Abstract

I study how the aggregation of product ratings on digital platforms affects the strategic behavior of third-party firms. I leverage an unexpected and exogenous change in the rating system on Apple’s App Store marketplace to show that for nearly a decade, the manner in which the App Store aggregated customer ratings led to less frequent product updating by developers. I show that products that were more reliant on the rating system were more responsive to the incentives created by this policy, and I provide evidence that this policy led to a decrease in developer effort on the platform.

Suggested Citation

  • Benjamin T. Leyden, 2021. "Platform Design and Innovation Incentives: Evidence from the Product Rating System on Apple's App Store," CESifo Working Paper Series 9113, CESifo.
    • Handle: RePEc:ces:ceswps:_9113
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    File URL: https://www.cesifo.org/DocDL/cesifo1_wp9113.pdf
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    Cited by:

    1. Xuan Teng, 2022. "Self-Preferencing, Quality Provision, and Welfare in Mobile Application Markets," CESifo Working Paper Series 10042, CESifo.

    More about this item

    Keywords

    reputation systems; online platforms; product innovation;
    All these keywords.

    JEL classification:

    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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