Journal of Economics

, Volume 120, Issue 2, pp 95–118 | Cite as

Exclusivity and exclusion on platform Markets

  • Subhasish M. Chowdhury
  • Stephen MartinEmail author


We examine conditions under which an exclusive license granted by the upstream producer of a component that some consumers regard as essential to one of two potential suppliers of a downstream platform market can make the unlicensed supplier unprofitable, although both firms would be profitable if both were licensed. If downstream varieties are close substitutes, an exclusive license need not be exclusionary. If downstream varieties are highly differentiated, an exclusive license is exclusionary, but it is not in the interest of the upstream firm to grant an exclusive license. For intermediate levels of product differentiation, an exclusive license is exclusionary and maximizes the upstream firm’s payoff.


Exclusion Essential components Exclusive contract Platform market 

JEL Classification

L12 L13 L22 



We thank Ralph Siebert, Dries De Smet, seminar participants at the IUPU—Indianapolis, Purdue University, the University of East Anglia, the Korea Institute of Industrial Economics and Trade, the University of Louisville, participants at the ZEW Conference on Platform Markets, Mannheim, and three anonymous referees for useful comments. Responsibility for errors is our own.

Supplementary material

712_2016_499_MOESM1_ESM.pdf (186 kb)
Supplementary material 1 (pdf 186 KB)


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Copyright information

© Springer-Verlag Wien 2016

Authors and Affiliations

  1. 1.University of East AngliaNorwichUK
  2. 2.Purdue UniversityWest LafayetteUSA

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