Open vs. closed Apple music distribution platform

In this thesis, based on the example case study of the Apple iTunes-iPods platform technology, two simple models are analyzed to gain a better understanding of open vs. closed business models as management and market strategies for multi-sided platforms. First, a simple model of a firm with a two-sided platform serving two distinct types of customers is evaluated, assuming network effects as the only intrinsic benefits to joining such a platform. Three different cases of market structure are investigated: (i) monopoly, (ii) open duopoly (iii) closed duopoly. Using game theory, comparative results of prices, profits, consumer surplus and social welfare among the three regimes are presented. The second model focuses on the effects of competition and compatibility between a profit-maximizing closed platform and an open, freely accessible platform. Given certain conditions, it is shown that compatibility can in fact be a profitable strategy for closed platforms while improving social welfare at the same time.

Department dc:contributor.department

Sloan School of Management.

Grantor dc:publisher

Massachusetts Institute of Technology

Year dc:date.issued

2008

Author dc:creator

• Aye, Thida, S.M. Massachusetts Institute of Technology

Advisor dc:contributor.advisor

• Charles Fine.

• Sloan School of Management.

Statement dc:rights

• M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission.

Licence dc:rights.uri

• http://dspace.mit.edu/handle/1721.1/7582

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/1721.1/45934

OAI identifier oai:identifier

oai:dspace.mit.edu:1721.1/45934