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PLATFORM COMPETITION WITH ‘MUST‐HAVE’ COMPONENTS *
Author(s) -
HOGENDORN CHRISTIAAN,
KA YAT YUEN STEPHEN
Publication year - 2009
Publication title -
the journal of industrial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.93
H-Index - 77
eISSN - 1467-6451
pISSN - 0022-1821
DOI - 10.1111/j.1467-6451.2009.00379.x
Subject(s) - component (thermodynamics) , competition (biology) , popularity , sign (mathematics) , business , computer science , market share , blocking (statistics) , telecommunications , computer network , marketing , mathematics , psychology , social psychology , ecology , mathematical analysis , physics , biology , thermodynamics
In platform‐component systems with indirect network effects, some ‘must‐have’ components are so popular with consumers that they create large, discrete indirect network effects when they become available on a platform. For example, ESPN is a must‐have component of cable TV platforms. This paper examines how platform market structures determine exclusive versus non‐exclusive contracts between platforms and components. It shows that a component provider is more likely to sign exclusive contracts with a single platform if its popularity is high, the platform market share difference is large, and cross‐platform indirect network effects are low.