American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Vertical Integration and Exclusivity in Platform and Two-Sided Markets
American Economic Review
vol. 103,
no. 7, December 2013
(pp. 2960–3000)
Abstract
This paper measures the impact of vertically integrated and exclusive software on industry structure and welfare in the sixth-generation of the US video game industry (2000-2005). I specify and estimate a dynamic model of both consumer demand for hardware and software products, and software demand for hardware platforms. I use estimates to simulate market outcomes had platforms been unable to own or contract exclusively with software. Driven by increased software compatibility, hardware and software sales would have increased by 7 percent and 58 percent and consumer welfare by $1.5 billion. Gains would be realized only by the incumbent, suggesting exclusivity favored the entrant platforms.Citation
Lee, Robin S. 2013. "Vertical Integration and Exclusivity in Platform and Two-Sided Markets." American Economic Review, 103 (7): 2960–3000. DOI: 10.1257/aer.103.7.2960Additional Materials
JEL Classification
- D12 Consumer Economics: Empirical Analysis
- L13 Oligopoly and Other Imperfect Markets
- L22 Firm Organization and Market Structure
- L63 Microelectronics; Computers; Communications Equipment
- L86 Information and Internet Services; Computer Software