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http://hdl.handle.net/10419/28083
  
Title:Platform interconnection and quality incentives PDF Logo
Authors:Salim, Claudia
Issue Date:2008
Series/Report no.:Diskussionsbeiträge des Fachbereichs Wirtschaftswissenschaft der Freien Universität Berlin 2008/16
Abstract:We analyze competition between two platforms with positive network externalities. Platforms can choose to interconnect or alternatively, operate exclusively. We examine how this decision will affect pricing behaviour and incentives to invest in Platform quality. We find that interconnection is aa means to reduce externalities one side exerts on the other. It changes the mode of competition for subscribers and resultsin higher subscription prices. Further, even though interconnection allows for quaality spillovers to the rival platform, it results in higher quality investment than the case of exclusive platforms. Coordination will facilitate collusion on the lowest quality levels possible if its provision is costly. For low quality costs it will lead to asymmetric networks. Therefore, interconnection without coordinated investment activities is welfare maximising.
Subjects:Two-sided markets
interconnection
investment in transaction quality
JEL:D43
D62
L13
ISBN:3938369876
Document Type:Working Paper
Appears in Collections:Diskussionsbeiträge, FB Wirtschaftswissenschaft, FU Berlin

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