Compatibility Choices, Switching Costs and Data Portability

Doh-Shin Jeon, Domenico Menicucci and Nikrooz Nasr
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Nikrooz Nasr: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

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Abstract: We study mix-and-match compatibility choices of firms selling complementary products in a dynamic setting. Contrary to what happens in a static setting where symmetric firms choose compatibility (Matutes and Régibeau, 1988), when switching costs are high and firms make price discrimination based on past purchases, symmetric firms choose incompatibility to soften future competition if the discount factor is large, which harms consumers. Interoperability increases consumer surplus at least for high switching costs. Data portability, by reducing switching costs, induces the firms to choose compatibility more often but, given a compatibility regime, benefits consumers only if a non-negative pricing constraint binds.

Keywords: Compatibility; Switching Cost; Data Portability; Interoperability; Cloud computing (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-com, nep-des, nep-ind, nep-mic and nep-reg
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Citations: View citations in EconPapers (4)

Published in American Economic Journal: Microeconomics, 2023, 15 (1), pp.30-73. ⟨10.1257/mic.20200309⟩

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Journal Article: Compatibility Choices, Switching Costs, and Data Portability (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04018457

DOI: 10.1257/mic.20200309

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