Economics of Vertical Restraints for Multi-Sided Platforms

Abstract

This paper presents an overview of what economists can say about vertical constraints by multi-sided platforms at this stage in the development of our knowledge about the economics of these businesses. It describes the general procompetitive and anticompetitive uses of vertical restraints by multi-sided platforms. It then focuses on the role of critical mass for multi-sided platforms and how vertical restraints might be used on the one hand, anti-competitively to prevent rivals from achieving critical mass and long-term growth and, on the other hand, pro-competitively, to ensure the platform and its customers that the platform will remain viable.

Keywords: vertical restraints, multi-sided platforms, antitrust, two-sided markets, abuse of dominance, monopolization, tying, exclusive dealing, bundled rebates, most favored nation clauses, critical mass

JEL Classification: K21, L12, L13, L42, L40, L41