Complementors’ Behavior: Cause of Complementors’ Undesirable Product Launch to Multi-sided Markets

Expectation of both sales and profit acts as an incentive structure for complementors, such as software vender, record rebels, TV program studio and so on. Because this expectation changes along with the product lifecycle progress, complementors’ behavior tends to be undesirable for multi-sided platform operators. Thus multi-sided platform operators have to manage the quality and variety of complements developed by external companies in order to sustain their sound ecosystem and to keep them growing. Otherwise the moral hazard problems between multi-sided platform operators and complementors cause the market failure of multi-sided platform to destroy their ecosystem. In this paper, I illustrated the mechanism of the moral hazard problem occurring firstly. Secondly I discussed the methodology to control the complementors’ product development investment especially focusing on the price structure of platforms. At the last section I drew the limitation of the price structure control method from the discussion.