Working paper

Platform Competition and App Development

Doh-Shin Jeon, and Patrick Rey

Abstract

We study the development of apps on competing platforms. We show that competition leads to commissions exceeding those maximizing consumer surplus (and, a fortiori, social welfare) whenever raising one commission reduces rivals' app bases. We relate this nding to economies of scope in app development and, to illustrate it, consider a setting in which some developers can port their apps at no cost: as their proportion increases, app development is progressively choked-o. Fostering platform competition or interoperability may therefore fail to produce the desired results. Within-platform app store competition, together with appropriate access conditions, may constitute a more promising avenue.

Keywords

Platform competition, ad-valorem commissions, app stores, app development;

JEL codes

  • D21: Firm Behavior: Theory
  • D43: Oligopoly and Other Forms of Market Imperfection
  • L13: Oligopoly and Other Imperfect Markets
  • L22: Firm Organization and Market Structure
  • L40: General
  • L50: General
  • L81: Retail and Wholesale Trade • e-Commerce

Reference

Doh-Shin Jeon, and Patrick Rey, Platform Competition and App Development, TSE Working Paper, n. 24-1566, September 2024.

See also

Published in

TSE Working Paper, n. 24-1566, September 2024