The effect of interoperability on between-platform competition

The aim of my PhD-project is to analyze platform competition. Platforms are intermediaries in two-sided markets, where they connect sets of agents. For example, Uber connects passengers and drivers, Facebook acts as an intermediary between advertisers and social media-users and Sony’s PlayStation is a middleman between gamers and game developers.

Due to the internet and digitization, several platforms have rapidly become dominant players in several markets. One of the concerns is that, once a two-sided market has ‘tipped’ towards monopoly, challenging a dominant platform is almost impossible due the presence of network effects. This might harm consumers or third-party firms that depend on the platform.

My research will focus on the effect of openness on the level of competition between platforms. Openness is as a strategic choice for platforms and – when openness is encouraged or enforced – an instrument for policy makers to boost competition. Furthermore, I will investigate the effects of interoperability – a characteristic of a product or system to work with other products or systems without any restrictions – as a specific form of openness. Interoperability can foster competition because it reduces the value of network effects. On the other hand, interoperability, as every form of standard-setting, can lead to anti-competitive outcomes.