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Competing for cookies: Platforms’ business models in data markets with network effects

Author

Listed:
  • Sarit Markovich

    (Kellogg School of Management, Northwestern University, Evanston, IL, USA)

  • Yaron Yehezkel

    (Coller School of Management, Tel-Aviv University, Ramat-Aviv, Israel)

Abstract

We consider platform competition when platforms can either 1) commercialize users’ data and in return offer their services for free (data-based business model); 2) protect users’ privacy and charge users for participation (subscription-based model); or 3) offer both options (the hybrid model). We find that competition does not always motivate the incumbent platform to protect users’ privacy. When network effects are strong, competition can motivate the incumbent to shift from the subscription-based model to the hybrid model; thereby, increasing data commercialization. Yet, the opposite case occurs when network effects are weak. Moreover, allowing the incumbent to adopt the hybrid model is welfare enhancing when network effects are strong, and welfare reducing (or neutral) otherwise.

Suggested Citation

  • Sarit Markovich & Yaron Yehezkel, 2024. "Competing for cookies: Platforms’ business models in data markets with network effects," Working Papers 24-02, NET Institute.
    • Handle: RePEc:net:wpaper:2402
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    More about this item

    Keywords

    platforms with network effects; business models; data commercialization;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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