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“Creating Platforms by Hosting Rivals”

“Creating Platforms by Hosting Rivals”. By Andrei Hagiu, Bruno Jullien & Julian Wright Discussion by Alex White BU Platform Symposium — July 18, 2018. Key Question. Does Apple prefer to have a cart that sells iPhone cases park right outside its store?. A Close Connection.

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“Creating Platforms by Hosting Rivals”

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  1. “Creating Platforms by Hosting Rivals” By Andrei Hagiu, Bruno Jullien & Julian Wright Discussion by Alex White BU Platform Symposium — July 18, 2018

  2. Key Question Does Apple prefer to have a cart that sells iPhone cases park right outside its store?

  3. A Close Connection • From the literature on vertical foreclosure, this has the feel of a “Chicago School Argument in reverse.” • Efficient screen? c.f. Rey & Tirole’s 2007 Handbook of IO Chapter, “A Primer on Foreclosure”

  4. Yet, there are several interesting, new elements… • Here, the story involves potential shopping cost savings • Several layers of subtlety: M Compete at arm’s length Host Serve only “B-types”, who purchase BS Serve all consumers

  5. Tradeoff: Exclude & Bundle vs. Host & Unbundle M Compete at arm’s length Host, serve only “B-types”, who purchase BS λBuA– F, λBΔuB uA–σ + λB(σ–ΔuB)

  6. Another Connection • “Spillover Showrooms” • A brick and mortar superstore that sells groceries and electronics is helped by the entry of an online electronic retailer. • Post-entry, the superstore’s showroom alerts consumers of the existence of products they want, which they then purchase from the cheaper online store. • However, the superstore can capture the efficiency gains via increased markups on groceries. (Current work in progress with Keyan Li)

  7. A Broader Question Over/Under/Optimal “Platformization” “In our view, there are many potential opportunities for existing companies to turn themselves into platforms by hosting rivals” (p. 2)

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