App developers and exclusive dealing: an overview of the operating system market

Abstract

Nowadays, a large number of markets involve platforms. These markets are known as multi-sided markets and are characterized by the presence of Network Externalities. The Operating System market for smartphones is one of the well-known examples of this type of market. The paper simulates four diff erent competition structures for App Developers: in the two-sided market of Operating Systems for Smartphones: no App Developers, a Monopoly Developer, Perfect Competition between Developers and Exclusive Dealing of one Developer with an Operating System. It shows that the market structure that gives the highest welfare benefits is the one where App Developers compete in prices at the perfect competition level, while Operating Systems compete in a diff erentiated product Bertrand Competition game. Also, it proves that a market with App Developers gives higher Consumer Welfare.