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“Exclusive Licensing in Complementary Network Industries”

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Abstract

This paper develops and analyzes a model of competition between platforms in an industry with indirect network effects, with a specific focus on complementary product exclusivity. The objective is to understand the determinants of exclusivity and explore its effects on competition. We find that the stage of platform market maturity and the asymmetry between the installed bases of platforms are critical determinants of exclusivity. Exclusivity is the dominant outcome in the nascent stage of the platform market and is sometimes the outcome in mature stages as well, while non-exclusivity is the usual outcome in the intermediate stages. In the nascent stages, the bigger platform secures exclusivity, while in the mature stages it is the smaller platform.

Suggested Citation

  • Ravi Mantena & Ramesh Sankaranarayanan & Siva Viswanathan, 2007. "“Exclusive Licensing in Complementary Network Industries”," Working Papers 07-04, NET Institute, revised Apr 2007.
    • Handle: RePEc:net:wpaper:0704
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    References listed on IDEAS

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    1. B. Douglas Bernheim & Michael D. Whinston, 1998. "Exclusive Dealing," Journal of Political Economy, University of Chicago Press, vol. 106(1), pages 64-103, February.
    2. Church, Jeffrey & Gandal, Neil, 1993. "Complementary network externalities and technological adoption," International Journal of Industrial Organization, Elsevier, vol. 11(2), pages 239-260, June.
    3. Benjamin Klein, 2001. "The Microsoft Case: What Can a Dominant Firm Do to Defend Its Market Position?," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 45-62, Spring.
    4. Michael D. Whinston, 2001. "Exclusivity and Tying in U.S. v. Microsoft: What We Know, and Don't Know," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 63-80, Spring.
    5. Aghion, Philippe & Bolton, Patrick, 1987. "Contracts as a Barrier to Entry," American Economic Review, American Economic Association, vol. 77(3), pages 388-401, June.
    6. Masten, Scott E & Snyder, Edward A, 1993. "United States versus United Shoe Machinery Corporation: On the Merits," Journal of Law and Economics, University of Chicago Press, vol. 36(1), pages 33-70, April.
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    Cited by:

    1. Corts, Kenneth S. & Lederman, Mara, 2009. "Software exclusivity and the scope of indirect network effects in the U.S. home video game market," International Journal of Industrial Organization, Elsevier, vol. 27(2), pages 121-136, March.
    2. Peng Huang & Marco Ceccagnoli & Chris Forman & D.J. Wu, 2009. "Participation in a Platform Ecosystem: Appropriability, Competition, and Access to the Installed Base," Working Papers 09-14, NET Institute, revised Sep 2009.
    3. 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.

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    Keywords

    Licensing; exclusive; networks; complementarity;
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