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Competing for Time: A Study of Mobile Applications

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  • Han Yuan

Abstract

A smartphone user allocates her time to multiple mobile applications. To study the competitive relationship among apps, I develop a discrete-continuous model of time allocation with a binding time constraint and estimate it with a weekly panel of app usage in China. If two apps are often used together, it is because either they are complements or the preferences of the two apps are positively correlated. To disentangle complementarity (substitutability) from correlation in preferences, I use the exclusion restriction that updates of an app should affect the utility of this app but not those of other apps. I estimate the model on three pairs of apps (substitutes, complements, and independent apps). I recover a reasonable competition pattern and simulate mergers of the three pairs of apps. I find that a seemingly innocuous merger of independent apps can hurt consumers due to the binding time constraint. My results confirm that users and firms can both benefit from a merger of complements. I also find that usage-based pricing leads to higher profits and total surplus compared with subscription pricing because it enables price discrimination based on usage.

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  • Han Yuan, 2020. "Competing for Time: A Study of Mobile Applications," 2020 Papers pyu309, Job Market Papers.
    • Handle: RePEc:jmp:jm2020:pyu309
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    Cited by:

    1. Guy Aridor, 2022. "Measuring Substitution Patterns in the Attention Economy: An Experimental Approach," CESifo Working Paper Series 10190, CESifo.

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    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing

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