Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/121382
Authors: 
Niedermayer, Andreas
Year of Publication: 
2015
Series/Report no.: 
SFB/TR 15 Discussion Paper 523
Abstract: 
We consider a software vendor first selling a monopoly platform and then an application running on this platform. He may face competition by an entrant in the applications market. The platform monopolist can benefit from competition for three reasons. First, his profits from the platform increase. Second, competition serves as a credible commitment to lower prices for applications. Third, higher expected product variety may lead to higher demand for his application. Results carry over to non-software platforms and, partially, to upstream and downstream firms. The model also explains why Microsoft Office is priced significantly higher than Microsoft's operating system.
Subjects: 
Platforms
Entry
Complementary Goods
Price Commitment
Product Variety
Microsoft
Vertical Integration
Two-Sided Markets
JEL: 
D41
D43
L13
L86
Document Type: 
Working Paper

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