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An Empirical Model of Mobile App Competition: The Role of the Revenue-Source Channel

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  • Kawaguchi, Kohei
  • Sato, Susumu
  • Kuroda, Toshifumi

Abstract

Mobile apps earn revenues from multiple sources, including download prices, in-app purchases, and advertisements. The presence of multiple revenue sources creates the channel through which business parameter changes affect app developers' choice of revenue sources, which may overturn standard price and advertisement pass-through effects. To capture this revenue-source channel, we propose an empirical model of mobile app competition employing a competition-in-utility approach that offers a tractable characterization of developers' revenue source choices. We estimate the model using Google Play data from Japan over 2015–2017, showing the effects of reduced transaction fees, lower advertisement prices, and app mergers, highlighting the importance of each channel.

Suggested Citation

  • Kawaguchi, Kohei & Sato, Susumu & Kuroda, Toshifumi, 2022. "An Empirical Model of Mobile App Competition: The Role of the Revenue-Source Channel," SocArXiv 2bdk4_v1, Center for Open Science.
    • Handle: RePEc:osf:socarx:2bdk4_v1
    DOI: 10.31219/osf.io/2bdk4_v1
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