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Platform Competition and Interoperability: The Net Fee Model

Author

Listed:
  • Mehmet Ekmekci

    (Department of Economics, Boston College)

  • Alexander White

    (School of Economics and Management, Tsinghua University)

  • Lingxuan Wu

    (Department of Economics, Harvard University)

Abstract

We study the effects of competition and interoperabilty in platform markets. To do so, we adopt an approach of competition in net fees, which is well-suited to situations where users pay additional charges, after joining, for on-platform interactions. Compared to other approaches, net fees expand the tractable scope to allow platform asymmetry and variable total demand. Regarding competition, our findings raise concerns, including possible dominance-inducing entry, which symmetric models overlook. Our results are more optimistic towards the helpfulness of policies that promote interoperability among platforms, but they urge caution when total demand variability is a significant factor.

Suggested Citation

  • Mehmet Ekmekci & Alexander White & Lingxuan Wu, 2021. "Platform Competition and Interoperability: The Net Fee Model," Working Papers 21-13, NET Institute.
    • Handle: RePEc:net:wpaper:2113
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    File URL: http://www.netinst.org/Wu_21-13.pdf
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    References listed on IDEAS

    as
    1. Jean-Charles Rochet & Jean Tirole, 2014. "Platform Competition in Two-Sided Markets," CPI Journal, Competition Policy International, vol. 10.
    2. Hongru Tan & Julian Wright, 2018. "A Price Theory of Multi-sided Platforms: Comment," American Economic Review, American Economic Association, vol. 108(9), pages 2758-2760, September.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Platform Competition; Big Tech; Net Fees; Interoperability;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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