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Welfare Effects of Platforms’ Exclusivity Clauses

Author

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  • Holler Marit

    (School of Business and Economics, University of Tübingen, Mohlstraße 36, 72074 Tübingen, Germany)

Abstract

Buyers are often active on multiple digital platforms, while gatekeeper platforms can force sellers contractually to use one platform exclusively. This paper considers the welfare effects of such exclusivity clauses for buyers, sellers and platforms in a platform duopoly with a seller membership fee. A setting with partially multihoming buyers and sellers is compared to one with partially multihoming buyers and singlehoming sellers. It is shown that exclusivity clauses predominately harm total welfare. Buyers suffer if sellers are exclusive on one platform, while platforms and sellers benefit from exclusivity clauses under certain conditions. In an environment with exclusivity clauses, when strong cross-group benefits and weak platform differentiation result in fierce price competition, exclusivity clauses can be welfare-enhancing.

Suggested Citation

  • Holler Marit, 2022. "Welfare Effects of Platforms’ Exclusivity Clauses," Review of Network Economics, De Gruyter, vol. 21(3), pages 143-170, October.
    • Handle: RePEc:bpj:rneart:v:21:y:2022:i:3:p:143-170:n:3
    DOI: 10.1515/rne-2023-0014
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    References listed on IDEAS

    as
    1. Robin S. Lee, 2013. "Vertical Integration and Exclusivity in Platform and Two-Sided Markets," American Economic Review, American Economic Association, vol. 103(7), pages 2960-3000, December.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    platform competition; two-sided markets; multihoming; exclusive contracts;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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