Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/307461 
Year of Publication: 
2024
Series/Report no.: 
ISER Discussion Paper No. 1265
Publisher: 
Osaka University, Institute of Social and Economic Research (ISER), Osaka
Abstract: 
The phenomenon where a network's value escalates with each additional user, known as a direct network effect, exists across industries that may differ in terms of interoperability or compatibility. For instance, while email and telephone services benefit from seamless cross-network communication, social media platforms typically do not, operating in silos (with some exceptions). Recent legislative initiatives, such as the Digital Market Act, spotlight the challenges and opportunities of enhancing network interoperability. This has led to a reevaluation of interoperability's impact on consumer benefits and API-driven business models, and industry experts and companies are now exploring increased interoperability. Our study introduces a model assessing the compatibility decision, whether by individual firms or unilaterally for the entire industry, and considers how this decision is linked to price regime decisions (personalized or uniform) in markets with direct network effects. We show that the two decisions are often linked, that parties often differ in their preferences across them, and that unilateral compatibility decisions can be used to deter entry and reduce competition.
Subjects: 
Interoperability
Direct Network Effects
Personalized Pricing
Uniform Pricing
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.