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Compatibility Choices, Switching Costs and Data Portability

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  • Doh-Shin Jeon

    (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Domenico Menicucci

    (UniFI - Università degli Studi di Firenze = University of Florence)

  • Nikrooz Nasr

    (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract

We study mix-and-match compatibility choices of firms selling complementary products in a dynamic setting. Contrary to what happens in a static setting where symmetric firms choose compatibility (Matutes and Régibeau, 1988), when switching costs are high and firms make price discrimination based on past purchases, symmetric firms choose incompatibility to soften future competition if the discount factor is large, which harms consumers. Interoperability increases consumer surplus at least for high switching costs. Data portability, by reducing switching costs, induces the firms to choose compatibility more often but, given a compatibility regime, benefits consumers only if a non-negative pricing constraint binds.

Suggested Citation

  • Doh-Shin Jeon & Domenico Menicucci & Nikrooz Nasr, 2023. "Compatibility Choices, Switching Costs and Data Portability," Post-Print hal-04018457, HAL.
    • Handle: RePEc:hal:journl:hal-04018457
    DOI: 10.1257/mic.20200309
    Note: View the original document on HAL open archive server: https://hal.science/hal-04018457
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    References listed on IDEAS

    as
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    3. Jeon, Doh-Shin & Menicucci, Domenico & Nasr, Nikrooz, 2016. "Compatibility Choices, Switching Costs and Data Portability: On the Role of the Non-Negative Pricing Constraint," TSE Working Papers 16-691, Toulouse School of Economics (TSE), revised Aug 2020.
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    Cited by:

    1. Jay Pil Choi & Doh‐Shin Jeon, 2023. "Platform design biases in ad‐funded two‐sided markets," RAND Journal of Economics, RAND Corporation, vol. 54(2), pages 240-267, June.

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    More about this item

    Keywords

    Compatibility; Switching Cost; Data Portability; Interoperability; Cloud computing;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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