An Economic Analysis of Platform Sharing / Arghya Ghosh, Hodaka Morita.

Format:

Book

Author/Creator:

Ghosh, Arghya.

Contributor:

National Bureau of Economic Research.

Morita, Hodaka.

Series:

Working Paper Series (National Bureau of Economic Research) no. w13058.

NBER working paper series no. w13058

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2007.

Summary:

We explore the managerial implications and economic consequences of platform sharing under models of horizontal and vertical product differentiation. By using a common platform across different products, firms can save on fixed costs for platform development. At the same time, platform sharing imposes restrictions on firms' ability to differentiate their products, and this reduces their profitability. It might appear that platform sharing across firms makes consumers worse off because firms cooperate in their product development processes to maximize their joint profit. We find, however, that platform sharing across firms benefits consumers in our framework because it intensifies competition in our horizontal differentiation model, and because it increases the quality of the lower-end product in our vertical differentiation model. We also show new channels through which a merger makes consumers worse off in the presence of platform sharing.

Notes:

Print version record

April 2007.