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Leveraging monopoly power by degrading interoperability: theory and evidence from computer markets

Genakos, Christos, Kühn, Kai Uwe and Van Reenen, John ORCID: 0000-0001-9153-2907 (2011) Leveraging monopoly power by degrading interoperability: theory and evidence from computer markets. CEP Discussion Papers (CEPDP1060). London School of Economics and Political Science. Centre for Economic Performance, London, UK.

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When will a monopolist have incentives to leverage his market power in a primary market to foreclose competition in a complementary market by degrading compatibility/interoperability of his products with those of her 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 which allows for complements (PCs and servers). Our estimates suggest that there were incentives to reduce interoperability which were particularly strong at the turn of the 21st Century.

Item Type: Monograph (Discussion Paper)
Official URL:
Additional Information: © 2011 The Author(s)
Divisions: Centre for Economic Performance
Subjects: H Social Sciences > HC Economic History and Conditions
JEL classification: O - Economic Development, Technological Change, and Growth > O3 - Technological Change; Research and Development
D - Microeconomics > D4 - Market Structure and Pricing > D43 - Oligopoly and Other Forms of Market Imperfection
L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance
L - Industrial Organization > L4 - Antitrust Issues and Policies
Date Deposited: 29 Feb 2024 15:33
Last Modified: 16 May 2024 12:33

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