Content provision and compatibility in a platform market

•Compatibility leads to higher prices.•Compatibility increases developers' incentives to create content for a larger user base.•Compatibility may result in higher or lower license fees, i.e., content may go down or up.•Compatibility may be particularly harmful if the scope of content is reduced.•Compatibility may be beneficial if content is sufficiently increased.

This paper studies the ambiguous welfare effects of compatibility in a platform market with endogenous content provision. Compatibility can be particularly harmful if it leads to reduced content but can be beneficial if content is sufficiently increased.