Table of Contents
Economics Research International
Volume 2017 (2017), Article ID 9752520, 10 pages
https://doi.org/10.1155/2017/9752520
Research Article

Cournot and Bertrand Competition in the Software Industry

1Department of Economics and Management, University of Pisa, Via Cosimo Ridolfi 10, 56124 Pisa, Italy
2Department of Economics, Kozminski University, Jagiellońska Street 57/59, 03-301 Warsaw, Poland

Correspondence should be addressed to Domenico Buccella

Received 13 July 2016; Revised 31 October 2016; Accepted 4 December 2016; Published 27 February 2017

Academic Editor: Jean Paul Chavas

Copyright © 2017 Luciano Fanti and Domenico Buccella. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

In a software industry based on a platform firm and two firms producing differentiated applications complementary to the platform, we investigate the effects on profits and welfare of the choice of different contracts (price versus quantity) by the application firms. In contrast to the traditional result, equilibrium profits are higher under Cournot or Bertrand competition depending upon the degree of complementarity between platform and application producers as well as the degree of substitutability between applications; the social welfare may be higher under Cournot when the application products are highly substitutable.