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The Control of Porting in Two-Sided Markets

Rufus Pollock

University of Cambridge - Faculty of Economics and Politics

June 29, 2007

A sizable literature has grown up in recent years focusing on two-sided markets in which economies of scale combined with complementarities between a platform and its associated 'software' or 'services' can generate indirect network effects (that is positive feedback between the number of consumers using that platform and the utility of an individual consumer). In this paper we introduce a model of 'porting' in such markets where porting denotes the conversion of 'software' or 'services' developed for one platform to run on another. Focusing on the case where a dominant platform exists we investigate the impact on equilibrium and the consequences for welfare of the ability to control porting. Specifically, we show that the welfare costs associated with the 'control of porting' may be more significant than those arising from pricing alone. This model and its associated results are of particular relevance because of the light they shed on debates about the motivations and effects of actions by a dominant platform owner. Recent examples of such debates include those about Microsoft's behaviour both in relation to its operating system and its media player, Apple's behaviour in relation to its DRM and iTunes platform, and Ebay's use of the cyber-trespass doctrine to prevent access to its site.

Number of Pages in PDF File: 36

Keywords: Network Effects, Two-Sided Markets, Porting, Antitrust, Competition

JEL Classification: L15, L12, L13

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Date posted: October 21, 2007  

Suggested Citation

Pollock, Rufus, The Control of Porting in Two-Sided Markets (June 29, 2007). Available at SSRN: http://ssrn.com/abstract=1018902 or http://dx.doi.org/10.2139/ssrn.1018902

Contact Information

Rufus Pollock (Contact Author)
University of Cambridge - Faculty of Economics and Politics ( email )
Austin Robinson Building
Sidgwick Avenue
Cambridge, CB3 9DD
United Kingdom
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