American Economic Review Vol. 103 No. 7 2013
Vertical Integration and Exclusivity in Platform and Two-Sided Markets
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.
- DOI
- 10.1257/aer.103.7.2960
- Volume
- 103
- Issue
- 7
- Pages
- 2960-3000
- Language
- en
- Sources
- openalex bibtex:phds-export.bib crossref