An Economic Analysis of Platform Sharing

Arghya Ghosh and Hodaka Morita ()

No 13058, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: 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.

JEL-codes: D40 L10 L40 M20 (search for similar items in EconPapers)
Date: 2007-04
New Economics Papers: this item is included in nep-bec, nep-com and nep-net
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Published as Ghosh, Arghya & Morita, Hodaka, 2008. "An economic analysis of platform sharing," Journal of the Japanese and International Economies, Elsevier, vol. 22(2), pages 164-186, June.
Published as An Economic Analysis of Platform Sharing , Arghya Ghosh, Hodaka Morita. in Organizational Innovation and Firm Performance , Baker, Hoshi, Itoh, and Nagaoka. 2008

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