Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 748: Efficiency and the Provision of Open Platforms

Joacim Tåg ()
Additional contact information
Joacim Tåg: Research Institute of Industrial Economics (IFN), Postal: P.O. Box 55665, SE-102 15 Stockholm, Sweden, and Swedish School of Economics and Business Administration, Helsinki, Finland

Abstract: Private firms may not have efficient incentives to allow third-party producers to access their platform or develop extensions for their products. Based on a two-sided market model, I discuss two reasons for why. First, a private firm may not be able to internalize all benefits from cross-group externalities arising with third-party extensions. Second, firms may have strategic incentives to shut out third-parties because it relaxes competition.

Keywords: Platforms; Two-sided Markets; Open versus Closed

JEL-codes: D40; L10

16 pages, April 28, 2008

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