One-way Compatibility Research Articles

The Interactive Impact of Demand Sharing Effect and Reduced Misfit Effect on Application Compatibility

In this article we study compatibility choices of two competing applications from an alternative perspective that considers demand sharing effect and reduced misfit effect to explain differences between the compatible and incompatible cases. We construct a game-theoretic model in which an application with two main businesses tries to share its exclusive demand of its unique business with its rival application on their competing business. We find that incentives to establish one-way compatibility—the application with exclusive demand grants access to its competitor—arise from the decrease of the reduced misfit cost while it may either arise or disappear from the decrease of the shared demand. In addition, consumer surplus increases in the reduced misfit cost and the shared demand. Moreover, we find the compatible case generates more social welfare than the incompatible case. And we find when the reduced misfit cost is beyond a threshold, the horizontal differentiation of the two applications is reduced to a lower level in the compatible case and the price competition is intensified in this situation. However, when the reduced misfit cost is less than a threshold, the price competition of the two applications can either be softened or intensified by compatibility, depending on the degree of shared demand.

Compatibility Strategies of Asymmetric Digital Platforms

We develop a three-stage game-theoretic model within a duopoly setting to investigate the profit-maximizing compatibility strategies of firms that produce revenue-generating asymmetric digital platforms and asymmetric digital application products which are offered as a bundle. For each compatibility strategy we also examine: by how much should the firm that wishes to offer its application product on a rival platform enhance the intrinsic value of the compatible system (i.e., incremental compatibility value). We find that the profit-maximizing compatibility choice depends on the adoption costs of a bundle and on the intrinsic value difference between the two digital platforms and/or application products. An incompatibility strategy is optimal when the adoption costs are low or the intrinsic value difference is small. Larger adoption costs and greater intrinsic value difference, provide greater incentives for both firms to pursue a one-way compatibility whereby the superior application product is compatible with the superior platform since this type of one-way compatibility increases the profitability of both firms. We also find that the greater the intrinsic value difference, the larger is the incremental compatibility value added to the superior application product when it is made compatible and is being customized to the superior platform.

Frenemies in Platform Markets: Heterogeneous Profit Foci as Drivers of Compatibility Decisions

We study compatibility decisions of two competing platform owners that generate profits through both hardware sales and royalties from content sales. We consider a game-theoretic model in which two platforms offer different standalone utilities to users. We find that incentives to establish one-way compatibility—the platform owner with smaller standalone value grants access to its proprietary content application to users of the competing platform—can arise from the difference in their profit foci. As the difference in the standalone utilities increases, royalties from content sales become less important to the platform owner with greater standalone value, but more important to the other platform owner. One-way compatibility can thus increase asymmetry between the platform owners’ profit foci and, given a sufficiently large difference in the standalone utilities, yields greater profits for both platform owners. We further show that social welfare is greater under one-way compatibility than under incompatibility. We also investigate how factors such as exclusive content and hardware-only adopters affect compatibility incentives. This paper was accepted by Chris Forman, information systems.

Agency or resale: Effects of a platform-performance investment for frenemy platforms

Competing platforms with hardware and content differentiation may adopt a one-way compatibility strategy, in which one platform owner allows its hardware users to purchase the competitor's content service, whereas the competitor does not. Moreover, the platform owners can choose a resale model or agency model. When a platform owner adopts the agency model, a platform-performance investment may force content providers to incur certain costs to ensure enhanced performance. In this paper, we develop a stylized model to investigate the effects of a platform-performance investment on a business-model decision by examining a platform ecosystem that consists of a unit mass of users, a content provider, and two downstream competing platform owners. We find that, when the unit misfit cost of hardware is much less than that of the content, if the royalty rate is too high (low), the agency (resale) model will be adopted by both platform owners. If the royalty rate is neither too high nor too low, the owners will adopt a different business model. When the unit misfit cost of hardware is weakly less than that of the content, the platform owners' business-model decision is jointly determined by the relative platform-performance investment efficiency and the royalty rate. Moreover, when both platform owners adopt the agency model, the price is not always higher than that when they use the resale model due to the negative effect of the performance investment. Finally, we present the condition under which the content provider would be better off if the provider is granted the right to change the business model by one platform owner.

Frenemies in Platform Markets: The Case of Apple's iPad vs. Amazon's Kindle

We study the compatibility decisions of two competing platforms that generate profits through both hardware sales and royalties from content sales. We consider a game-theoretic model in which the platform hardware may offer different standalone utilities to users who have different preferences over the two platforms. We find that incentives to establish one-way compatibility — the platform with smaller standalone value allows users of the competing platform to access its content — can arise from the difference in their profit foci. As the difference in the standalone utilities increases, royalties from content sales become less important to the platform with greater standalone value but becomes more important for the other platform. Compatibility increases asymmetry between the platforms’ profit foci and, when the difference in the standalone utilities is sufficiently large, yields greater profits for both platforms. We further show that social welfare is greater under one-way compatibility than under incompatibility, and there exist no incentives for either platform to establish one-way compatibility the other way round. We investigate as well how factors such as different platform production costs, exclusive content, and endogenized royalty rates affect compatibility incentives.

WINDOWS OS VERSUS MAC OS: COULD ONE-WAY COMPATIBILITY BE AN EQUILIBRIUM OUTCOME?

One-way compatibility is a phenomenon often observed in reality and Windows OS versus Mac OS is a good example. A vertical differentiation model is presented herein to analyze system firms' compatibility choices. This paper differs from the existing literature in two aspects: (1) The purebred and hybrid systems are vertically differentiated; (2) Since one-way compatibility is a phenomenon often observed in real life, this paper considers compatibility as being unilateral rather than bilateral and the possibility of one-way compatibility. We find that, depending on the quality of the hybrid system, any state of compatibility could be an equilibrium outcome. When the quality of a hybrid system is very small, both firms adopt compatibility. Second, despite the fact that firms always earn higher profit under full compatibility than they do under incompatibility, the equilibrium outcome is incompatibility when the quality of a hybrid system is very high, which means firms face a prisoners' dilemma under this situation. Finally, since a firm favors incompatibility more when its rivals adopt compatibility than when its rival adopts incompatibility, the equilibrium outcome is one-way compatibility when the quality of a hybrid system is intermediate. From this point of view, this paper provides a theoretical interpretation of one-way compatibility between Windows OS versus Mac OS. We also show that the market outcome is socially inefficient when the hybrid system's quality is relatively high.

Life history differences between two forms of the social spider mite, Stigmaeopsis miscanthi

The two forms of Stigmaeopsis miscanthi (Saito) (called LW and HG) differ in their levels of male-to-male aggression, differ in their diapause attributes, and morphologically in the male leg I armor. Furthermore, a type of reproductive isolation exists between the forms, although some one-way compatibility is maintained. Here we looked for any differences in life history traits between the two forms under experimental conditions. The intrinsic rate of natural increase (r(m)) of the LW form was lower than that of the HG form, the difference seemingly caused by the developmental speed of the latter. Although the developmental speeds of HG under several temperature regimens were significantly higher than those of LW, the low development threshold temperatures of the two forms were almost identical. This study addresses why a significant difference in r(m) exists in relation to other behavior and physiological (diapause) adaptations.

The effects of one-way compatibility on technology adoption in systems markets

This paper analyzes the effects of one-way compatibility on technology adoption in a market that is characterized by a free-entry condition on the software side. We show that hardware-backward compatibility increases a new-generation hardware firm’s profit; the effects of software-backward compatibility on the hardware firm’s profits depend on the distribution of consumer types.

Open Source vs. Proprietary Software: Competition and Compatibility

We use a Hotelling linear city model to study competition between open source and proprietary software, where only the producer of the proprietary software aims at maximizing the profit. The producer of the proprietary software must decide on compatibility. Different compatibility strategies will lead to different network externality, and thus result in different profit for the producer of the proprietary software. We found that the proprietary producer's choice of compatibility strategy depends on the market coverage conditions. When the market is fully covered, one-way compatibility is the best strategy for the proprietary software. When the market is partly covered, two-way compatibility is the best strategy. Such results are not affected by software quality. Furthermore, when the provider of the open source software pursues the maximum market share rather than reacts passively, two-way compatibility would be the best choice for both the open source and the proprietary software. Moreover, the proprietary software producer does not favor its proprietary rival changing to open source software. Such a change may lower the social welfare.

One-Way Compatibility, Two-Way Compatibility and Entry in Network Industries

We study the strategic choice of compatibility between two initially incompatible network goods in a two-stage game played by an incumbent and an entrant firm. Compatibility may be achieved by means of a converter. We derive a number of results under different assumptions about the nature of the converter (one-way vs two-way), the existence of property rights and the possibility of side payments. With incompatibility, entry deterrence occurs for sufficiently strong network effects. In the case of a two-way converter, which can only be supplied by the incumbent, incompatibility will result in equilibrium unless side payments are allowed and the network externalities are sufficiently low. When both firms can build a one-way converter and there are no property rights on the necessary technical specifications, the unique equilibrium involves full compatibility. Finally, when each firm has property rights on its technical specifications, full incompatibility is observed at the equilibrium with no side payments; when these are allowed the entrant sells access to its network to the incumbent which refuses to do the same and asymmetric one-way compatibility results in equilibrium. The welfare analysis shows that the equilibrium compatibility regime is socially inefficient for most levels of the network effects.

Molecular homology and incompatibility relationships between F and IncH1 plasmids.

IncH1 plasmids and the F plasmid of Escherichia coli display one-way compatibility. An entering IncH1 plasmid is incompatible with a resident F plasmid, but is compatible when it is the resident plasmid. There is little molecular homology between IncH1 plasmids and the F plasmid. A single 5 MDal EcoRI restriction enzyme fragment from digests of several IncH1 plasmids hybridizes with probes constructed from the primary replication region of F. Homology can be demonstrated only with the gene for the essential replication protein of F (gene E), but the expression of incompatibility behaviour appears to be associated with the presence of the secondary replicon of the F plasmid. Thus R27 and F are compatible under growth conditions allowing replication and maintenance of F by the secondary replicon. However, a mutant F plasmid which lacks the secondary replicon of F is incompatible with R27 in both directions, irrespective of the growth conditions used.

Experimental hybridization in certain diploid mexican solanum species

S. bulbocastanum is highly interfertile with S. cardiophyllum. Through the F1 to F5 little breakdown due to sterility or lack of plant vigour occurred. F1 plants of a 5-species hybrid involving S. pinnatisectum, S. trifidum, S. jamesii, S. bulbocastanum, and S. cardiophyllum could also be intercrossed. One-way compatibility was frequently expressed in progenies of these interspecific crosses. It appears to be cytoplasmically controlled, although nuclear factors may be present which interact with cytoplasmic factors. The group of Mexican diploid potatoes represented by these species is potentially interbreeding and shows evidence of introgression throughout its range in central and Western Mexico.