Platform competition in the tablet PC market: The effect of application quality |
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| Institution: | 1. Office of Communications UK;2. Dipartimento di Scienze Economiche ed Aziendali “M. Fanno”, Università di Padova, Italy;3. School of Economics and Centre for Competition Policy, University of East Anglia, UK;1. Department of Medicine, Medical College of Wisconsin, 8701 Watertown Plank Rd., Milwaukee, WI 53226, USA;2. Center for Advancing Population Science, Medical College of Wisconsin, 8701 Watertown Plank Rd., Milwaukee, WI 53226, USA;3. Purdue University, Department of Economics, Krannert School of Management, 403 West State Street, West Lafayette, IN 47907-2056, USA;4. CESifo, Munich, Germany;1. Dipartimento di Economia e Finanza, Catholic University of Milan, Via Necchi 5, 20123 Milano, Italy;2. Dipartimento di Matematica per le Scienze Economiche, Finanziarie ed Attuariali, Catholic University of Milan, Largo Gemelli 1, Milano 20123, Italy;1. Department of Economics and Social Sciences, Telecom Paris, Institut Polytechnique de Paris, France;2. CESifo, Munich, Germany;3. Dipartimento di Scienze Economiche ed Aziendali “M. Fanno”, Università di Padova, Padova, Italy;1. Compass Lexecon, Spain;2. Graduate Institute of International and Development Studies, Geneva, CEPR and Compass Lexecon, Belgium;3. Bergamo University and Compass Lexecon, Italy |
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| Abstract: | The tablet PC market is dominated by two platforms: iOS and Android. In this paper, we combine tablet-level data with data on the quality of the top 1000 mobile applications from these platforms and estimate a structural demand model. We exploit variations over three periods and five European countries to find whether the application quality affects tablet demand. We then run two counterfactuals. The first counterfactual suggests that an improvement in application quality benefits the tablet producers on that platform with a more pronounced effect on the demand for Android-based tablets. The second counterfactual discusses the policy of leveling the app quality of the two stores. It shows that such a policy favors the tablet producers adopting the lowest quality app store (Google) and stimulates the adoption of tablet PCs. This generates consumer surplus in tablet demand. |
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