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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/28526
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| Title: | Applications Barriers to Entry and Exclusive Vertical Contracts in
Platform Markets |
| Authors: | Prieger, James - Pepperdine University
Hu, Wei-Min - Peking University |
| Issue Date: | 2007 |
| Series/Report no.: | NET Institute Working Paper;07-46 |
| Abstract: | Our study extends the empirical literature on whether vertical
restraints are anticompeti-tive. We focus on exclusive contracting in
platform markets, which feature indirect net-work effects and thus are
susceptible to applications barriers to entry. Theory suggests that
exclusive contracts in vertical relationships between the platform
provider and soft-ware supplier can heighten the entry barriers. We test
these theories in the home video game market. We measure the impact on
hardware demand of the indirect network ef-fects from software. We find
that although network effects are present, the marginal ex-clusive game
contributes virtually nothing to console demand. Thus, allowing
exclusive vertical contracts in platform markets need not lead to a
market structure dominated by one system protected by a hedge of
complementary software. Our investigation suggests that bargaining power
enjoyed by the best software providers and the skewed distribution of
game revenue prevents the foreclosure of rivals through exclusive contracting. |
| URI: | http://hdl.handle.net/2451/28526 |
| Appears in Collections: | NET Institute Working Papers Series
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