Apple's disaster: Linking two-sided markets and strategic delegation

• Type: Article in International Scientific Journal
• Date: 2018

Authors

Ribeiro, VM (Author) Other

Journal

Title: Managerial and Decision Economics

Vol. 39 No. 2

Pages: 32-45

ISSN: 0143-6570

Publisher: Wiley-Blackwell

Indexing

ISI Web of Knowledge - 0 Citations

Scopus - 3 Citations

Other information

Authenticus ID: P-00N-BZ2

DOI: 10.1002/mde.2865

Abstract (EN): Asymmetric pricing structure and different intergroup network externalities are characteristics of two-sided markets not captured in the analysis of one-sided markets. Focusing on Cournot duopoly where membership decision may be delegated to a manager, several equilibrium regimes are sustained depending on the fixed cost of managerial hiring and strength of the network externality exerted by the side whose demand is more price sensitive. The change from null to full delegation sharpens the asymmetric pricing structure and reduces the price level in two-sided markets. Contrary to one-sided markets with direct network effects, the prisoner's dilemma holds for sufficiently strong indirect network externalities. Imperfect interside discrimination of managerial incentives ensures profit maximization and efficient consumers' allocation. Private hiring should occur when the two-sided market exhibits symmetric pricing structure. An explanation for Apple's unprecedented event is provided. The reduction of revenue and managerial bonus in 2016 may be justified by the dissemination of full delegation in the Chinese information technology industry. Apple's upcoming strategy may consist on reducing both access prices, although the side whose demand is more price sensitive should have a greater price reduction. Alternatively, improving the content quality may constitute Apple's corporate strategy, thereby inducing a skimming pricing strategy on Chinese rivals.

Language: English

Type (Professor's evaluation): Scientific

No. of pages: 14