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PLATFORM COMPETITION WITH 'MUST-HAVE' COMPONENTS -super-*

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Abstract

In platform-component systems with indirect network effects, some 'must-have' components are so popular with consumers that they create large, discrete indirect network effects when they become available on a platform. For example, ESPN is a must-have component of cable TV platforms. This paper examines how platform market structures determine exclusive versus non-exclusive contracts between platforms and components. It shows that a component provider is more likely to sign exclusive contracts with a single platform if its popularity is high, the platform market share difference is large, and cross-platform indirect network effects are low. Copyright 2009 The Authors. Journal compilation 2009 Blackwell Publishing Ltd. and the Editorial Board of The Journal of Industrial Economics.

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