ONLINE APPENDIX: Vertical Integration and Exclusivity in Platform and Two-Sided Markets

Recall that ι ∈ I ≡ {0, 1}3 denotes a consumer’s inventory state. Slightly abusing notation, also let ι = 1PS2 + 1XB × 2 + 1GC × 4, where 1j is an indicator for console j being owned. I discretize the distributions of αp and αγ to model consumer heterogeneity: consumers are divided among R groups indexed by i, each with price-sensitivity and gaming-preference coefficients (α i , α γ i ) and initial population shares λi,t=0,ι=0 obtained via independent univariate Gauss-Hermite quadrature (c.f. Judd (1998); Heiss and Winschel (2007)). In estimation, αγ was allowed to take on 11 distinct values and αp 5 values, resulting in R = 55 distinct consumer types. However, due to the difficulty in identifying heterogeneity in αp, only heterogeneity in αγ was ultimately allowed. Let λi,t,ι represent the share of the population comprising a consumer of type i with inventory ι at time t. An overview of the estimation routine is: