The Control of Porting in Two-Sided Markets
AbstractA 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.
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Bibliographic InfoPaper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0754.
Date of creation: Nov 2007
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Web page: http://www.econ.cam.ac.uk/index.htm
Network Effects; Two-Sided Markets; Porting; Antitrust; Competition.;
Other versions of this item:
- L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
- L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-11-10 (All new papers)
- NEP-COM-2007-11-10 (Industrial Competition)
- NEP-MIC-2007-11-10 (Microeconomics)
- NEP-MKT-2007-11-10 (Marketing)
- NEP-NET-2007-11-10 (Network Economics)
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