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A new University of California, ����ԭ��, study suggests that digital platforms — like Steam or the App Store — can play a pivotal role in reshaping competitive dynamics between vendors and enhancing outcomes for all players in the digital marketplace.

Published in Marketing Science, the “Vertical Competition on a Common Platform” explores how platforms that provide shared infrastructure (such as development tools or user interfaces) influence how vendors differentiate their products, set prices and respond to commission rates. The paper is co-authored by Professor Rachel R. Chen of the UC ����ԭ�� Graduate School of Management.

To illustrate their framework, the researchers examined Steam, a widely used digital distribution platform for PC video games. Steam provides shared tools that allow gaming developers to easily distribute, update and monetize their games.

The study points out how improvements in such platform infrastructure — such as developer toolkits or mod support — can have asymmetric effects: premium game developers may respond by enhancing their product features, while others may scale back. This dynamic shifts competition and creates new strategic opportunities for platforms to align their pricing and infrastructure decisions with developer behavior.

“Our research shows that platforms don’t just passively host digital products — they actively shape how vendors compete and how much consumers benefit,” said Chen.

The study finds that when platforms enhance their shared infrastructure, high-quality vendors tend to improve their products further, while low-quality vendors pull back — widening the gap in product differentiation. However, when commission rates rise, both types of vendors reduce product quality, leading to lower prices and expanded sales volumes.

Notably, the researchers identify conditions under which platform strategy creates a “win-win-win:” Vendors enjoy higher profits, consumers see greater value, and platforms boost their own earnings.

“This kind of strategic platform behavior can fuel innovation and efficiency across the digital economy,” said Chen. “It demonstrates how technology platforms can adapt to shifts in vendor productivity — such as those brought on by generative AI — and turn them into shared growth.”

In addition to Chen, the paper was co-authored by Xiaojuan Puyang (Sichuan Normal University), Zheyin (Jane) Gu (University of Connecticut), and Juan Li (Nanjing University).