We examine the competition between a proprietary platform and an open platform,where each platform holds a two-sided market consisted of app developers and users.The open platform cultivates an innovative environment by inviting public efforts todevelop the platform itself and permitting distribution of apps outside of its own appmarket; the proprietary platform restricts apps sales solely within its app market. Weuse a game theoretic model to capture this competitive phenomenon and analyze theimpact of growth of the open source community on the platform competition. We foundthat growth of the open community mitigates the platform rivalry, and balances the developernetwork sizes on the two platforms. The platforms’ relative dominance is foundto be a key determining factor in the effect of open community growth in equilibrium.Furthermore, total surplus on the open platform and total welfare of the two platformsboth increase as the open community grows.
Game theory, open innovation, platform economy, network effect
Digital Communications and Networking | Technology and Innovation | Theory and Algorithms
Information Systems and Management
The 8th Annual International Industrial Organization Conference, Vancouver, Canada, 2010 May 14-16
Singapore Academy of Law
City or Country
Open innovation in platform competition. (2010). The 8th Annual International Industrial Organization Conference, Vancouver, Canada, 2010 May 14-16. Research Collection School Of Information Systems.
Available at: http://ink.library.smu.edu.sg/sis_research/3853
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