Multisided Platforms, Dynamic Competition, and the Assessment of Market Power for Internet-Based Firms
Posted by Social Science Research Network
David S. Evans (Global Economics Group)
Abstract: Market power on each side of a multisided platform, whether in the form of increasing prices or decreasing quality, is constrained by the risk of losing sales on the other sides. That tends to weaken market power on each side and encourages platforms to keep prices lower and quality higher than they would absent these feedback effects. In some cases the nature of the business model, and competition, result in the platform allowing one type of customers to participate in the platform for free or even to subsidize their participation. Non-price methods of attracting customers are especially important in this case, particularly when the business model adopted by the industry makes it difficult for platforms to move from free participation. To provide a reliable assessment of competitive constraints, market power analysis must consider the interdependencies in demand by the participants on the platform as well as have heightened focus on non-price competition when the participation for one group is free. Market shares should be used cautiously in assessing market power for multi-sided platforms, especially when they reflect only one side of the platform, and therefore do not account for the interdependent customer groups, or concern a free platform side where there is no monetary measure of value. Finally, dynamic competition makes the analysis of market power complex because it results in feature competition, and potentially drastic innovation, on one side of a platform that has feedback effects on the other side of the platform. The courts and authorities have recognized these points in Qihoo 360 v. Tencent, Cartes Bancaires v. European Commission, the Facebook/WhatsApp merger, and the Microsoft/Skype merger. These principals should become part of the standard analysis of multi-sided platforms by courts and competition authorities globally. These concerns are illustrated in the context of multi-sided platforms that offer online services where free services and dynamic competition are especially important.
Featured News
Canadian Breadmakers Settle Price-Fixing Lawsuit
Jul 25, 2024 by
CPI
EssilorLuxottica Open to Meta as Shareholder, Says CEO Francesco Milleri
Jul 25, 2024 by
CPI
California Supreme Court Upholds Proposition 22, Securing Independent Contractor Status for Uber and Lyft Drivers
Jul 25, 2024 by
CPI
Paramount Global Investor Sues to Block Skydance Media Merger
Jul 25, 2024 by
CPI
Software Vendors Win Class Action Status in Antitrust Case Against CDK Global
Jul 25, 2024 by
CPI
Antitrust Mix by CPI
Antitrust Chronicle® – International Trade & Antitrust
Jul 26, 2024 by
CPI
What is Wrong with the WTO Discipline on Subsidies?
Jul 26, 2024 by
CPI
The Abiding Tension Between Trade Remedy Law and Antitrust
Jul 26, 2024 by
CPI
Trade and Antitrust: An End to Isolationism
Jul 26, 2024 by
CPI
International Trade Law and Domestic Regulation of Generative Artificial Intelligence: Divergent Approaches?
Jul 26, 2024 by
CPI