Spring 2010 Calendar
Economics Department Seminar Series Spring 2010
Thursday, April 1, at 4:00 p.m.
Nixon Room, Hawthorne-Longfellow Hall
The speaker is Chris Hogendorn of Wesleyan University.
His paper is titled “Platform Components with Outside Opportunities” (PDF)
Two-sided platforms coordinate two types of users in order to increase the value of the whole system surrounding the platform. Users of a platform have different outside opportunities, and these influence their behavior on the platform. Platforms often limit these outside projects through licensing agreements that contain exclusivity clauses. These are often thought to reflect market power and a foreclosure motivation, but we show here that they can be a way of managing the "quality commons" aspect of a platform. Professor Hogendorn analyzes a platform where all component developers produce two kinds of quality - inside quality for their offerings on the platform and outside quality on their outside project. He shows that there are cases where exclusive licensing agreements that shut down the outside projects can increase social welfare, while in other cases they reduce social welfare. The reason is that if consumers and the platform value components inside quality enough, all agents prefer to be protected from low-quality behavior, even at the cost of giving up outside projects.