Application bundling in system markets

Cornière (de), Alexandre and Taylor, Greg (2017) Application bundling in system markets. TSE Working Paper, n. 17-827, Toulouse

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Official URL: http://tse-fr.eu/pub/31806

Abstract

Motivated by recent investigations over Google's practices in the smartphone industry, we study bundling in markets for devices that allow consumers to use applications. The presence of applications on a device increases demand for it, and application developers earn revenues by interacting with consumers. A firm that controls multiple applications can offer them to device manufacturers either individually or as a bundle. We present a novel mechanism through which anticompetitive bundling can be profitable: Bundling reduces rival application developers' willingness to pay manufacturers for inclusion on their devices, and allows a multiapplication developer to capture a larger share of industry profit. Bundling can also strengthen competition between manufacturers and thereby increase consumer surplus, even if it leads to foreclosure of application developers and a loss in product variety

Item Type: Monograph (Working Paper)
Language: English
Date: July 2017
Place of Publication: Toulouse
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Institution: Université Toulouse 1 Capitole
Site: UT1
Date Deposited: 16 Apr 2018 15:12
Last Modified: 16 Apr 2018 15:12
OAI ID: oai:tse-fr.eu:31806
URI: http://publications.ut-capitole.fr/id/eprint/25632

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