Platform Competition and Interoperability: The Net Fee Model
46 Pages Posted: 25 Oct 2021
Date Written: September 30, 2021
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.
Keywords: Platform Competition, Big Tech, Net Fees, Interoperability
JEL Classification: D21, D43, D85, L13
Suggested Citation: Suggested Citation