Compatibility Choices, Switching Costs, and Data Portability

Doh-Shin Jeon, Domenico Menicucci and Nikrooz Nasr

American Economic Journal: Microeconomics, 2023, vol. 15, issue 1, 30-73

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 Regibeau 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 nonnegative pricing constraint binds.

JEL-codes: D11 D21 D43 D82 L86 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (4)

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DOI: 10.1257/mic.20200309

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