Author: 

Xiaohui Xu

Abstract: 

Many e-commerce platform ecosystems have evolved around complementary products/services/technologies. Inmobile commerce, smart phones (running on Android, iOS, or Windows) are platform products that have manycomplementary apps for each specific ecosystem. The complementary effects usually greatly enhance the value ofowning both the platform product and the complements to a customer. Consequently, an e-commerce ecosystem thathas independent firms making separate output decisions tends to under-produce both the platform andcomplementary products. In this paper we prove that licensing the platform products to independent licensees can beutilized as a mechanism to credibly signal a higher level of output of the platform products and induce improvedavailability of complementary products. Different forms of licensing arrangements are studied and compared in thiswork. The equilibrium licensing contract terms are solved and the results indicate that a platform product providerhas incentives not to sell directly to the market, but to license the product / technology to independent licensees.

Key Word: 

Published Date: 

May, 2017

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