Platform Competition and Interoperability: The Net Fee Model

NET Institute Working Paper No. 21-13

43 Pages Posted: 25 Oct 2021 Last revised: 15 Aug 2022

See all articles by Mehmet Ekmekci

Mehmet Ekmekci

Boston College - Department of Economics

Alexander White

Tsinghua University - School of Economics & Management

Lingxuan Wu

Department of Economics, Harvard University

Date Written: August 11, 2022

Abstract

Is more competition the key to mitigating dominance by large tech platforms? Could regulation of such markets be a better alternative? We study the effects of competition and interoperabilty regulation in platform markets. To do so, we propose 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 existing approaches, the net fee model expands the tractable scope to allow variable total demand, platform asymmetry and merger analysis. Regarding competition, our findings raise two concerns: adding more platforms may lead to market contraction or the emergence of a dominant firm. In contrast, we find that interoperability can play a key role in boosting user participation and reducing market dominance. Broadly speaking, our results favor policy interventions that improve the quality of market competition, as opposed to those that merely give rise to more competitors.

Keywords: Platform Competition, Big Tech, Net Fees, Interoperability

JEL Classification: D43, L13, L15, L40

Suggested Citation

Ekmekci, Mehmet and White, Alexander and Wu, Lingxuan, Platform Competition and Interoperability: The Net Fee Model (August 11, 2022). NET Institute Working Paper No. 21-13, Available at SSRN: https://ssrn.com/abstract=3945134 or http://dx.doi.org/10.2139/ssrn.3945134

Mehmet Ekmekci

Boston College - Department of Economics ( email )

United States

Alexander White (Contact Author)

Tsinghua University - School of Economics & Management ( email )

Mailbox A-44
Weilun Building
Beijing, 100084
China

HOME PAGE: http://alex-white.net

Lingxuan Wu

Department of Economics, Harvard University ( email )

Littauer Center
1805 Cambridge Street
Cambridge, MA MA 02138
United States

HOME PAGE: http://www.lingxuanwu.me

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