The Doubly-Nested Prisoner's Dilemma: Platform Enablement and Strategic Delegation on Industrial Internet Platforms

Industrial internet platforms reshape both the digital infrastructure and the internal governance of downstream firms. This paper shows that platform enablement can trap firms in a doubly-nested prisoner's dilemma: access decisions (whether to join the platform) and delegation decisions (whether to hire a manager) simultaneously yield Nash equilibria that are strictly Pareto-dominated by the joint non-access, non-delegation optimum, with joint profit losses of approximately 3.2 percent. Unlike single-decision platform traps (Hagiu and Wright, 2026), our dilemma arises from the interaction between two distinct firm-level decisions, each generating its own Pareto-suboptimal equilibrium. Within a three-tier platform-duopoly-consumers Bertrand game, we obtain three results. First, platform-enhanced network externalities shift the sales-oriented delegation threshold downward by an amount equal to the platform's network-enhancement parameter, pushing firms from defensive profit-oriented to offensive sales-oriented incentive contracts. Second, the dilemma is sustained by a division of roles within the platform's two-part tariff: the fixed fee absorbs network premia through a threat-point channel, while the usage fee distorts marginal incentives. Third, the dilemma forms a structural ridge along the Choi-Lee threshold, occupying approximately 18 percent of the relevant differentiation-network parameter space. Because the equilibrium violates neither per se collusion nor abuse-of-dominance prohibitions, conventional antitrust is structurally inadequate; mandatory data interoperability, by raising non-accessing firms' outside option, emerges as a targeted instrument.