Platform Annexation

26 Pages Posted: 9 Mar 2021 Last revised: 2 Feb 2022

See all articles by Fiona M. Scott Morton

Fiona M. Scott Morton

Yale School of Management; National Bureau of Economic Research (NBER)

Susan Athey

Stanford University

Date Written: February 16, 2021

Abstract

We introduce the concept of platform annexation, whereby a platform annexes tools or other adjacent markets in a way that interferes with multi-homing by users, lessening competition. Traditional analysis of mergers often falls back on a simple categorization of conduct into horizontal and vertical. We argue that platform annexation bears more resemblance to horizontal conduct than vertical and is capable of horizontal foreclosure that harms consumers. In particular, while traditional vertical integration in a supply chain has the potential to reduce conflicts of interest and may favor efficiency, platform annexation creates conflicts of interest and has the potential to reduce efficiency, particularly when undertaken by a market leader who has the incentive to reduce multi-homing. Thus, it should be viewed with substantial skepticism by regulators and enforcers.

Keywords: antitrust, platform, merger, monopolization

JEL Classification: L!2, L41

Suggested Citation

Scott Morton, Fiona M. and Athey, Susan, Platform Annexation (February 16, 2021). Available at SSRN: https://ssrn.com/abstract=3786434 or http://dx.doi.org/10.2139/ssrn.3786434

Fiona M. Scott Morton (Contact Author)

Yale School of Management ( email )

New Haven, CT 06520
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Susan Athey

Stanford University ( email )

Stanford, CA 94305
United States

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