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Denial of Interoperability and Future First-Party Entry

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  • Massimo Motta
  • Martin Peitz

Abstract

Motivated by a recent antitrust case involving Google, we develop a rationale for foreclosure when the owner of an essential input is not yet integrated downstream. Our theory rests on data-enabled network effects across periods. If a platform considers offering a first-party app in the future, by not allowing a third-party app to be hosted on its platform, it ensures that the third-party app would be a weaker competitor to its own app in the future. This makes denial of access attractive as a full or partial foreclosure strategy, which is costly in the short term but may be beneficial in the long term. We also study the effects of policies such as compulsory access or data-sharing, showing under which conditions they might be beneficial to consumers or backfire.

Suggested Citation

  • Massimo Motta & Martin Peitz, 2023. "Denial of Interoperability and Future First-Party Entry," CRC TR 224 Discussion Paper Series crctr224_2023_447, University of Bonn and University of Mannheim, Germany.
    • Handle: RePEc:bon:boncrc:crctr224_2023_447
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    File URL: https://www.crctr224.de/research/discussion-papers/archive/dp447
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    References listed on IDEAS

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    More about this item

    Keywords

    Exclusionary practices; vertical interoperability; refusal to deal; digital platforms; vertical foreclosure; data-enabled networks effects; compulsory access; data-sharing policies;
    All these keywords.

    JEL classification:

    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law

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