Abstract: With the blossom of platform mode, a kind of “hardware/software” platform emerged. On the one hand, it sells its products to consumers, on the other hand, it provides the channel for third-party developers to sell complementary service and content to consumers. Such as smart phones, video game machines, e-readers, smart cars, etc. Take the smartphone as an example, after purchasing the smartphone, consumers enhance their experience value through downloading applications from the smartphone platform and installing them. Therefore, the “hardware/software” platform can profit by selling its own products and providing platform service. Furthermore, in order to meet the needs of consumers for higher performance of platform products and obtain the competitive advantage, the platform also continuously innovates the product. Based on the above background, how should the platform price its product and royalty fee, and how should third-party developers price its service or content? And how the platform and third-party developers cooperate to stimulate innovation in the platform product’s performance, improve system efficiency and optimize their own profits.

Key words: platform; performance improvement; complementary network effect; quantity discount contract; fixed transfer payment