Impact of pre-installation on firm profits, application functionality and welfare
研究主导硬件厂商在智能手机中预装自有应用的行为，发现预装会降低厂商对应用功能的投资，但能提高消费者福利，且在高安装成本下才有利可图。
Dominant technology firms are increasingly relying on pre-installed applications in the smartphone ecosystem to capture more value. In fact, since 2007, Apple has increased the number of its own apps pre-installed on the iPhone. Given that smartphones have become central to the functioning of many businesses and are widely used by consumers for accessing online services, a deeper understanding of the pre-installation behaviour is vital. In this paper, we examine the pre-installation strategy in the context of its relationship with the dominant hardware firm’s strategic decision to invest in improving the integration of software applications with its smartphone and the associated market and welfare implications. Using a game-theoretic model, our analysis offers several interesting results. Importantly, we show that, under pre-installation, dominant hardware firm reduces its investment in application functionality (both for its own application as well as the rival application). Together with an asymmetric installation cost burden, users switch to its own application. Consequently, pre-installation of its own application is profitable for a sufficiently high installation cost; otherwise, it is not profitable. From a welfare point of view, pre-installation increases consumer welfare. Additionally, social welfare increases with pre-installation for a sufficiently high installation cost; otherwise, it decreases. Overall, these key results offer insights to managers and regulators on managing the design and competitive dynamics of the digital ecosystem.