Advertisement

Journal of Economics

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

Exclusivity and exclusion on platform Markets

  • Subhasish M. Chowdhury
  • Stephen MartinEmail author
Article

Abstract

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.

Keywords

Exclusion Essential components Exclusive contract Platform market 

JEL Classification

L12 L13 L22 

Notes

Acknowledgments

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)

References

  1. Argentesi E (2004) Demand estimation for Italian newspapers: the impact of weekly supplements, Working Paper of the European University Institute, 2004/28Google Scholar
  2. Armstrong M (2006) Competition in two-sided markets. Rand J Econ 37:668–691CrossRefGoogle Scholar
  3. Bucklin RE, Caves RE, Lo AW (1989) Games of survival in the US newspaper industry. Appl Econ 21:631–649CrossRefGoogle Scholar
  4. Chipman JS, Moore JC (1978) The new welfare economics 1939–1974. Int Econ Rev 19:547–584CrossRefGoogle Scholar
  5. Church J, Gandal N (2005) Platform competition in telecommunications. In: Cave M, Majumdar S, Vogelsang I (eds) Technology evolution and the internet, the handbook of telecommunications economics, vol 2. North-HollandGoogle Scholar
  6. Dewenter R (2003) Media markets with habit formation. University of the Federal Armed Forces Hamburg. Economics Discussion Paper No. 5Google Scholar
  7. Doganoglu T, Wright J (2010) Exclusive dealing with network effects. Int J Ind Organ 28:145–154CrossRefGoogle Scholar
  8. Gelsanliter D (1995) Fresh ink: behind the scenes of a major metropolitan newspaper. University of North Texas Press, DentonGoogle Scholar
  9. Genesove D (2003) Why are there so few (and fewer and fewer) two newspaper towns?, MimeoGoogle Scholar
  10. Hagiu A, Lee RS (2011) Exclusivity and control. J Econ Manag Strategy 20:679–708CrossRefGoogle Scholar
  11. Hogendorn C, Yuen KY (2009) Platform competition with ‘must-have’ components. J Ind Econ 57:294–318CrossRefGoogle Scholar
  12. Kind HJ, Nilssen T, Sørgard L (2007) Competition for viewers and advertisers in a TV oligopoly. J Media Econ 20:211–233CrossRefGoogle Scholar
  13. Lee RS (2013) Vertical integration and exclusivity in platform and two-sided markets. Am Econ Rev 103:2960–3000CrossRefGoogle Scholar
  14. Rey P, Tirole J (2007) A primer on foreclosure, Chapter 33. In: Armstrong M, Porter R (eds) Handbook of industrial organization, vol 3. Elsevier B.V., New York, pp 2145–2220Google Scholar
  15. Rochet JC, Tirole J (2006) Two-sided markets: a progress report. Rand J Econ 37:645–667CrossRefGoogle Scholar
  16. Rosse JN (1970) Estimating cost function parameters without using cost data: illustrated methodology. Econometrica 38:256–275CrossRefGoogle Scholar
  17. Rysman M (2007) An empirical analysis of payment card usage. J Ind Econ 55:1–36CrossRefGoogle Scholar
  18. Rysman M (2009) The economics of two-sided markets. J Econ Perspect 23(3):125–143CrossRefGoogle Scholar
  19. Shapiro C (1999) Exclusivity in network industries. George Mason Law Rev 7:673–683Google Scholar
  20. Stennek J (2014) Exclusive quality: why exclusive distribution may benefit the TV viewers. Inf Econ Policy 26:42–57CrossRefGoogle Scholar
  21. Strömberg D (2004) Mass media competition, political competition, and public policy. Rev Econ Stud 71:265–284CrossRefGoogle Scholar
  22. Viecens MF (2009) Pricing strategies in two-sided platforms: the role of sellers’ competition, FEDEA Working Paper 2009–11Google Scholar
  23. Weeds H (2015) TV wars: exclusive content and platform competition in pay TV. Econ J. doi: 10.1111/ecoj.12195
  24. Whinston M (1990) Tying, foreclosure, and exclusion. Am Econ Rev 80:837–859Google Scholar
  25. Whinston M (2006) Lectures on antitrust economics. MIT Press, CambridgeGoogle Scholar

Copyright information

© Springer-Verlag Wien 2016

Authors and Affiliations

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

Personalised recommendations