Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/271976 
Year of Publication: 
2023
Series/Report no.: 
CESifo Working Paper No. 10332
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
Platform interoperability is considered a powerful tool to promote competition in digital markets when network effects are at play. We study the effect of interoperability on competition between two ad-financed platforms, allowing for endogenous multi-homing of consumers. When the platforms are symmetric and decide non-cooperatively on their level of interoperability, interoperability emerges in equilibrium if the value of multi-homers relative to single-homers is sufficiently low for advertisers. From a welfare perspective, the equilibrium level of interoperability can be either too low or too high. When one ("large") platform has an installed base of customers, its incentive to make its services interoperable is lower than for the other, smaller platform. However, mandating interoperability between the asymmetric platforms is not always socially optimal.
Subjects: 
interoperability
platform competition
multi-homing
advertising
JEL: 
L13
L86
L15
Document Type: 
Working Paper
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