Platform Competition in the Tablet PC Market: The Effect of Application Quality

Abstract

Apple iOS is a closed platform;Google Android is open. In this paper,we combine data on iOS and Android tablet sales with data on the top 1000 mobile applications from both platforms for five European countries and estimate a structural demand model.We find that the quality of applications affects tablet demand. We then run two counterfactuals. In line with our theory, the exclusion of low-quality applications is beneficial to tablet producers in both platforms but is more pronounced for Apple.Tablet producers in the platform with lower quality applications gain most from cross-platform app interoperability.