Leveraging Monopoly Power by Degrading Interoperability: Theory and Evidence from Computer Markets

Genakos, Christos, Kühn, Kai-Uwe and Van Reenen, John (2018) Leveraging Monopoly Power by Degrading Interoperability: Theory and Evidence from Computer Markets. Economica, 85 (340). pp. 873-902. ISSN 0013-0427

[img] PDF (Accepted manuscript) - Submitted Version
Restricted to Repository staff only until 06 November 2019.

Download (2582kB) | Request a copy

    Abstract

    When will a monopolist have incentives to leverage her/his market power in a primary market to foreclose competition in a complementary market by degrading compatibility/interoperability of her/his products with those of her/his rivals? We develop a framework where leveraging extracts more rents from the monopoly market by ‘restoring’ second‐degree price discrimination. In a random coefficient model with complements, we derive a policy test for when incentives to reduce rival quality will hold. Our application is to Microsoft's alleged strategic incentives to leverage market power from personal computer to server operating systems. We estimate a structural random coefficients demand system that allows for complements (personal computers and servers). Our estimates suggest that there were incentives to reduce interoperability that were particularly strong at the turn of the 21st century.

    Item Type: Article
    Faculty \ School: Faculty of Social Sciences > School of Economics
    Related URLs:
    Depositing User: LivePure Connector
    Date Deposited: 21 Sep 2018 10:30
    Last Modified: 09 Apr 2019 13:45
    URI: https://ueaeprints.uea.ac.uk/id/eprint/68325
    DOI: 10.1111/ecca.12257

    Actions (login required)

    View Item