Abstract
This work deals with issues characterizing the mobile app industry. In particular, we focus on an app developer who competes against either a rival app developer or a private label of the distribution platform, and who can bypass the platform’s distribution and billing systems. The innovation of this work lies in considering the co-creation of app quality by the app developer and the distribution platform while using a revenue-sharing contract, which is popular in the mobile app industry. We investigate both tactical equilibrium (the parties’ operational decisions for a given market structure) and strategic equilibrium (for the developer—whether or not to bypass; for the platform—whether or not to discourage bypassing by improving the contract terms). Our research provides answers to the following strategic questions: Is it beneficial for the app developer to bypass the distribution platform and offer the app to users directly in a competitive environment? Is it beneficial for the distribution platform to introduce a private label to compete with the app developer? Can bypassing also be beneficial for the platform and/or the rival developer? In response to these questions, several counter-intuitive results are revealed.
| Original language | English |
|---|---|
| Pages (from-to) | 859-890 |
| Number of pages | 32 |
| Journal | Annals of Operations Research |
| Volume | 332 |
| Issue number | 1-3 |
| DOIs | |
| State | Published - Jan 2024 |
Bibliographical note
Publisher Copyright:© The Author(s), under exclusive licence to Springer Science+Business Media, LLC, part of Springer Nature 2023.
Funding
This research was supported by the ISRAEL SCIENCE FOUNDATION (Grant No. 1571/20).
| Funders | Funder number |
|---|---|
| Israel Science Foundation | 1571/20 |
Keywords
- Co-creation of quality
- E-commerce
- Horizontal competition
- Private label
- Revenue sharing contract
- Supply chain management