The “Kill Zone”: When a Platform Copies to Eliminate a Potential Threat

Abstract

A monopoly platform may prevent a startup which sells a complementary product from developing a competing platform by copying it. Imitation reduces the potential rival's profits from the new platform and thus its incentives to invest. The anticipation of the incumbent's aggressive behavior may also create an “ex ante” effect, by inducing the rival not to challenge the incumbent with a new platform (i.e., not to enter the “kill zone”) and to develop another (noncompeting) product instead. This finding is robust to several extensions.