Pricing strategies in software platforms : video consoles vs. operating systems

We study software platforms for which the total amount that users spend depends on the twosided pricing strategy of the platform firm, and on the pricing strategy of application developers. When setting prices, developers may be constrained by one of two margins: the demand margin and the competition margin. By analyzing how these margins affect pricing strategies we find some conditions which explain features of the market of operating systems and its differences with the one corresponding to the video consoles. The problem that arises when the platform does not set prices (as an open platform) is considered. We show that policy makers should promote open source in operating systems platforms but not necessarily in video consoles. We also analyze the incentives for a platform to integrate with applications as a function of the extent of substitutability among them and provide a possible explanation for the observed fact of vertical disintegration in these industries

Pricing strategies in software platforms : video consoles vs. operating systems

We study software platforms for which the total amount that users spend depends on the twosided pricing strategy of the platform firm, and on the pricing strategy of application developers. When setting prices, developers may be constrained by one of two margins: the demand margin and the competition margin. By analyzing how these margins affect pricing strategies we find some conditions which explain features of the market of operating systems and its differences with the one corresponding to the video consoles. The problem that arises when the platform does not set prices (as an open platform) is considered. We show that policy makers should promote open source in operating systems platforms but not necessarily in video consoles. We also analyze the incentives for a platform to integrate with applications as a function of the extent of substitutability among them and provide a possible explanation for the observed fact of vertical disintegration in these industries.

TWO-SIDED PLATFORMS WITH ENDOGENOUS QUALITY DIFFERENTIATION

In this paper we construct a simple model of platform price competition with two main novel features. First, platforms endogenously decide the quality of their `access service' and second, each group exhibits preferences not only about the number of agents in the opposite group, but also about their type or quality. Additionally, sellers also care about the type of agents in their own group. Our interest is to examine the set of conditions under which, in spite of the network externalities, more than one plaftorm coexist in equilibrium. We show that when quality is endogenously determined by the choices of agents these platforms could be asymmetric.

Two-sided platforms with endogenous quality differentiation

In this paper we construct a simple model of platform price competition with two main novel features. First, platforms endogenously decide the quality of their 'access service' and second, each group exhibits preferences not only about the number of agents in the opposite group, but also about their type or quality. Additionally, sellers also care about the type of agents in their own group. Our interest is to examine the set of conditions under which, in spite of the network externalities, more than one plaftorm coexist in equilibrium. We show that when quality is endogenously determined by the choices of agents these platforms could be asymmetric

Precio, calidad y asequibilidad de la banda ancha : las disparidades entre los países de la región son muy importantes

El análisis de un conjunto de indicadores permite concluir que la región muestra mejoras en términos de calidad del acceso (velocidades ofertadas) aunque los resultados en relación a los precios son menos optimistas. Al mismo tiempo, mientras que algunos países muestran importantes avances, otros aparecen rezagados en un alto porcentaje de los indicadore

Essays in two-sided platforms

In the first chapter we present a critical survey of the literature on platforms and two-sided markets. First, we introduce two general models, called the “Armstrong’s model” and the “Rochet-Tirole’s model”, to understand the main issues that arise in the literature. Second, we analyze some of the main assumptions of the above models. Finally, we review some articles related to specific markets and to competition policy issues. In the second chapter we study software platforms for which the total amount that users spend depends on the two-sided pricing strategy of the platform firm, and on the pricing strategy of application developers. When setting prices, developers may be constrained by one of two margins: the demand margin and the competition margin. By analyzing how these margins affect pricing strategies we find some conditions which explain features of the market of operating systems and its differences with the one corresponding to the video consoles. The problem that arises when the platform does not set prices (as an open platform) is considered. We show that policy makers should promote open source in operating systems platforms but not necessarily in video consoles. We also analyze the incentives for a platform to integrate with applications as a function of the extent of substitutability among them and provide a possible explanation for the observed fact of vertical disintegration in these industries. Third chapter analyzes the effect of firm dominance on the incentives to become compatible and how compatibility decisions affect investment incentives. We will consider compatibility in two dimensions: compatibility of the complementary good and inter-network compatibility. We show that if products are substitutes, compatibility tends to be welfare decreasing with the potential negative consequences of increasing compatibility being more likely when asymmetries are strong. We also find that in many instances the dominant firm’s interests regarding compatibility are in line with those of users, and are opposite to those of the weak firm, which will always demand more compatibility to be enforced. Finally we show that compatibility may harm innovation, particularly for the dominant firm. In the fourth chapter we construct a simple model of platform price competition with two main novel features. First, platforms endogenously decide the quality of their ‘access service’ and second, each group exhibits preferences not only about the number of agents in the other side of the market, but also about their type or quality. Additionally, sellers may also care about the type of agents in their own side. Our interest is to examine the set of conditions under which, in spite of the presence of network effects, more than one platform coexist in the market. We show that although there are two ex-ante identical platforms, in equilibrium they could be asymmetric in quality and profits. In particular, buyers prefer a market outcome in which two different quality platforms are presen

Goodbye Excessive Prices… as a Competition Law Infringement in Argentina

On February 23, 2023, Argentina’s Supreme Court upheld a decision that struck down the first and only sanction made by the country’s competition agency over excessive pricing.2Following an investigation and resolution by the National Commission for the Defense of Competition (Comisión Nacional de Defensa de la Competencia, “CNDC”), the Secretary of Commerce had, in June 2018, issued a fine against the Argentinian organization that collectively manages the copyrights for music works (“SADAIC”) over their abuse of dominance in fixing the price of fees hotels must pay for installing a TV in their rooms. Furthermore, a recommendation was made to the National Executive Power (Poder Ejecutivo Nacional, “PEN”) to regulate said fees, given that existing norms did not cover them (unlike other activities, which included price caps).3On August 20, 2019, the Federal Civilian and Commercial Chamber – Chamber III – supported the recommendation to regulate hotel fees and, towards the end of August 2019, the PEN issued a decree regulating the fees charged for the public use of intellectual property of authors and performers by hotels.4 Nonetheless, the Chamber also struck down the fine. Later, the Supreme Court ultimately rejected the appeal presented by the State and upheld the decision striking down the fine in the SADAIC case.This had been the first and only case where Argentina’s competition authority had sanctioned an agent for excessive pricing. The legal test used by the competition authority was quite strict, and consistent with a comparable case upheld by the European Court of Justice. Therefore, if this case was not ratified as an exploitative abuse of dominance through excessive pricing, one must conclude that Argentina’s Law for the Defense of Competition (Ley de Defensa de la Competencia) does not consider excessive pricing to be an infraction-worthy conduct.In this article, we explain the details of the case, as well as the arguments and evidence considered by the CNDC when making their recommendations for a fine and the regulation. We then analyze the Chamber’s sentence, which was recently upheld by the Supreme Court.Fil: Greco, Esteban Manuel. Universidad de Buenos Aires; ArgentinaFil: Viecens, María Fernanda. Consejo Nacional de Investigaciones Científicas y Técnicas; Argentin

Goodbye Excessive Prices… as a Competition Law Infringement in Argentina

On February 23, 2023, Argentina’s Supreme Court upheld a decision that struck down the first and only sanction made by the country’s competition agency over excessive pricing.2Following an investigation and resolution by the National Commission for the Defense of Competition (Comisión Nacional de Defensa de la Competencia, “CNDC”), the Secretary of Commerce had, in June 2018, issued a fine against the Argentinian organization that collectively manages the copyrights for music works (“SADAIC”) over their abuse of dominance in fixing the price of fees hotels must pay for installing a TV in their rooms. Furthermore, a recommendation was made to the National Executive Power (Poder Ejecutivo Nacional, “PEN”) to regulate said fees, given that existing norms did not cover them (unlike other activities, which included price caps).3On August 20, 2019, the Federal Civilian and Commercial Chamber – Chamber III – supported the recommendation to regulate hotel fees and, towards the end of August 2019, the PEN issued a decree regulating the fees charged for the public use of intellectual property of authors and performers by hotels.4 Nonetheless, the Chamber also struck down the fine. Later, the Supreme Court ultimately rejected the appeal presented by the State and upheld the decision striking down the fine in the SADAIC case.This had been the first and only case where Argentina’s competition authority had sanctioned an agent for excessive pricing. The legal test used by the competition authority was quite strict, and consistent with a comparable case upheld by the European Court of Justice. Therefore, if this case was not ratified as an exploitative abuse of dominance through excessive pricing, one must conclude that Argentina’s Law for the Defense of Competition (Ley de Defensa de la Competencia) does not consider excessive pricing to be an infraction-worthy conduct.In this article, we explain the details of the case, as well as the arguments and evidence considered by the CNDC when making their recommendations for a fine and the regulation. We then analyze the Chamber’s sentence, which was recently upheld by the Supreme Court.Fil: Greco, Esteban Manuel. Universidad de Buenos Aires; ArgentinaFil: Viecens, María Fernanda. Consejo Nacional de Investigaciones Científicas y Técnicas; Argentin

Digital divide in Latin America : broadband price, quality and affordability in the region

Spanish version available in IDRC Digital Library: Brecha digital en América Latina : precio, calidad y asequibilidad de la banda ancha en la regiónThe purpose of this paper is to understand the state of broadband price, speed and affordability in 19 Latin American countries, using data from a study by DIRSI of plans offered in the region. Analysis of the indicators shows that the region has advanced in terms of quality of access (speeds offered), although price outcomes are less optimistic. Disparities between countries are very significant, however. While some countries show significant progress, others lag in a high percentage of the indicators

Brecha digital en América Latina : precio, calidad y asequibilidad de la banda ancha en la región

Versión en inglés disponible en la Biblioteca Digital del IDRC: Digital divide in Latin America : broadband price, quality and affordability in the regionEl objetivo de este trabajo es conocer la situación de 19 países de América Latina en cuanto a precios, velocidades y asequibilidad de la banda ancha con datos obtenidos de un relevamiento que lleva a cabo DIRSI de los planes ofertados en la región. El análisis de los indicadores trabajados permite concluir que la región muestra mejoras en términos de calidad del acceso (velocidades ofertadas) aunque los resultados en relación a los precios son menos optimistas. Al mismo tiempo, las disparidades entre países son muy importantes. Mientras que algunos países muestran importantes avances, otros aparecen rezagados en un alto porcentaje de los indicadores