NET Institute*
www.NETinst.org
Working Paper #07-04
April 2007
Exclusive Licensing in Complementary Network Industries
Ravi Mantena
Simon Graduate School of Business Administration, University of Rochester
Ramesh Sankaranarayanan
School of Business, University of Connecticut
Siva Viswanathan
Smith School of Business, University of Maryland
* The Networks, Electronic Commerce, and Telecommunications (“NET”) Institute,
http://www.NETinst.org, is a non-profit institution devoted to research on network
industries, electronic commerce, telecommunications, the Internet, “virtual networks”
comprised of computers that share the same technical standard or operating system, and
on network issues in general.
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Exclusive Licensing in Complementary Network Industries
Ravi Mantena
William E. Simon Graduate School of Business Administration
University of Rochester, Rochester, NY.
Ramesh Sankaranarayanan
School of Business
University of Connecticut, Storrs, CT.
Siva Viswanathan
Robert H. Smith School of Business
University of Maryland, College Park, MD.
.
Abstract
This paper develops and analyzes a model of competition between platforms in an
industry with indirect network effects, with a specific focus on complementary product
exclusivity. The objective is to understand the determinants of exclusivity and explore
its effects on competition. We find that the stage of platform market maturity and the
asymmetry between the installed bases of platforms are critical determinants of
exclusivity. Exclusivity is the dominant outcome in the nascent stage of the platform
market and is sometimes the outcome in mature stages as well, while non-exclusivity is
the usual outcome in the intermediate stages. In the nascent stages, the bigger platform
secures exclusivity, while in the mature stages it is the smaller platform.
We are grateful to Nick Economides and the NET Institute for generous financial assistance. We
would also like to thank