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SILVIA ROSSETTO Tinbergen Institute Amsterdam ENRICO C. PEROTTI University of Amsterdam; Centre for Economic Policy Research (CEPR) December 19, 2000 EFA 0549; AFA 2001 New Orleans Meetings |
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Abstract: We investigate the valuation of platform investment, such as a software operating system or an internet portal webpage. Platform investment is the creation of an innovative distribution and production infrastructure which increases access to customers; as a result it reduces entry costs in related products. Relative to conventional producers, firms built around platforms enjoy enhanced entry options in uncertain market segments, to be exercised at the optimal strategic timing. When the platform grants a strong strategic advantage, the innovator firm can optimally choose the timing of entry when its strategic gain exceeds the value of the wating option; in case of weaker advantage, the platform firm enters just before its competitor would. In a context of increased uncertainty, the relative value of platform to traditional strategies increases; the value of waiting to invest rises, but the value of platforms increases even more. In some cases, platform can reduce entry by making parallel monopoly sustainable.
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Abstract has been viewed 1520 times |
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Go to Download Document Button to download paper from the SSRN Electronic Paper Collection Contact Information for SILVIA ROSSETTO (Contact Author) [email protected] (Email address for SILVIA ROSSETTO ) Tinbergen Institute Amsterdam Faculty of Economics and Econometrics, Finance Group Roeterstaat 11 1017 EG Amsterdam Netherlands +31 20 525 5351 (Phone) +31 20 525 5285 (Fax) Contact Information for ENRICO C. PEROTTI [email protected] (Email address for ENRICO C. PEROTTI ) University of Amsterdam Roetersstraat 18 Finance Group Amsterdam 1018 WB Netherlands +31 20 525 4159 (Phone) +31 20 525 5285 (Fax) (No e-mail address available for ENRICO C. PEROTTI ) Centre for Economic Policy Research (CEPR) 90-98 Goswell Road London EC1V 7RR United Kingdom |
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Suggested Citation Rossetto, Silvia and Perotti, Enrico C., "Internet Portals as Portfolios of Entry Options" (December 19, 2000). EFA 0549; AFA 2001 New Orleans Meetings. http://ssrn.com/abstract=243190 |
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