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Private Regulation by Platform Operators: Implications for Usage Intensity

Authors/Editors: Claussen, J.
Kretschmer, T.
Mayrhofer, P.
Published: 2010
Type: Articles in Refereed Journals (International)
Published by: Discussion Papers in Business Administration
: 2010-06, University of Munich, Munich School of Management

Abstract

Platforms operators act as private regulators to increase usage and maximize profits. Their goals depend on the development of the platform: overcoming the chicken-egg problem early on requires attracting platform participants while quality becomes more important later on. Private regulators influence third-party business models, entry barriers, and usage intensity. We analyze how drivers of usage intensity on Facebook’s application platform were affected by a policy change that increased quality incentives for applications. This change led to the number of installations of each application becoming less important, applications in more concentrated sub-markets achieving higher usage, and applications staying attractive for longer.

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