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Optimal platform strategies in the smartphone market
Author(s) -
Unno Masaru,
Xu Hua
Publication year - 2013
Publication title -
electronics and communications in japan
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.131
H-Index - 13
eISSN - 1942-9541
pISSN - 1942-9533
DOI - 10.1002/ecj.11462
Subject(s) - purchasing , revenue , computer science , incentive , smartphone application , operations research , business , marketing , engineering , microeconomics , economics , finance , multimedia
Summary In a smartphone market, smartphone makers encourage smartphone application providers ( APs ) to create more popular smartphone applications by making a revenue‐sharing contract with APs and providing application‐purchasing support to end users. In this paper, we study revenue‐sharing and application‐purchasing support problem between a risk‐averse smartphone maker and a smartphone application provider. The problem is formulated as the smartphone makers’ risk‐sensitive stochastic control problem. The sufficient conditions for the existence of the optimal revenue‐sharing strategy, the optimal application‐purchasing support strategy, and the incentive compatible effort recommended to APs are obtained. The effects of the smartphone makers’ risk‐sensitivity on the optimal strategies are also discussed. A numerical example is solved to show the computation aspects of the problem. © 2013 Wiley Periodicals, Inc. Electron Comm Jpn, 96(7): 1–10, 2013; Published online in Wiley Online Library ( wileyonlinelibrary.com ). DOI 10.1002/ecj.11462