Frank MacCrory
ABSTRACT
The Smartphone platform market is a "multi-layer" two-sided market in that it requires the coordination of two strategic firms -- an OS vendor and a mobile carrier -- to join the customers on both sides of the network, namely application developers and end users. A new OS vendor entering into such a market must partner with at least one existing carrier in the market, and the entrant may perceive some advantage to contracting exclusively with one carrier. The market is also dynamic because users tend to sign multi-period contracts with carriers. We determine the conditions under which a new OS vendor would sign an exclusive contract with a single carrier, the responses of incumbent firms, and the optimum length of the exclusive period. We contrast the entrant's private optimum with that of end users and application developers to analyze the role of a regulator in multi-layer two-sided markets.
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Index Terms
- The Smartphone You Want on the Carrier You Don't: Exclusive Contracts in Dynamic Multi-Layer Platforms
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