Tuesday, July 5, 2011
Posted by D. Daniel Sokol
ABSTRACT: This paper examines the pricing of mobile applications when app providers can supply consumers directly or through a mobile platform (such as a mobile smart phone, tablet or other device). It is demonstrated that when platform access (i.e., purchasing a device) takes place in advance of app pricing, a non-trivial unravelling problem exists that rules out selling platform access at a positive price. Consequently, all platform revenues come from sharing app provider revenues. It is demonstrated that several restrictive conditions on app providers such as most favoured customer clauses can allow the platform provider to earn more profits and charge a positive access price in situations where the platform might not otherwise be provided.