This study investigates the unsuccessful entry by Microsoft on the market for operating systems for tablets in 2012. The market was already dominated by 2 incumbents – Apple and Google. We set up a structural model of demand for iOS, Android and Windows RT tablets that embraces device characteristics and the number of mobile app available for each operating system. The size of the app store is a very important complement feature driving tablet choices. Microsoft Store lagged considerably behind the 2 incumbent app stores, causing a serious competitive disadvantage for Windows RT vis-a-vis devices powered by Android and iOS.
In the counterfactual analysis, we show that elimination of this disadvantage would allow Windows RT global share to move from 1% to 46% giving it a leading position among the 3 operating systems. We also analyse the impact of Microsoft’s self-preferencing behaviour on a downstream competition. Elimination of discriminatory licensing charges would roughly double the sales of OEMs, pushing down the share of Microsoft’s Surface Tab within Windows RT segment from 92% to 85%.
Nestor Duch-Brown is a scientific officer and team leader at the Digital Economy Unit of the Joint Research Centre (European Commission). Before joining the JRC in 2012, he was an associate professor at the University of Barcelona and researcher at the Barcelona Institute of Economics. He holds a PhD in Economics from the University of Barcelona.
His current research focuses on digital economics, with a particular emphasis on online platforms and the economics of digital data. More broadly, his research interests are oriented towards the quantification of the economic impact of digital and ICT technologies on markets, firms’ strategies, and consumer behaviour as well as government regulation.
No registration required. If you have any questions about this seminar, please email Luke Slater.