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The Control of Porting in Two-Sided Markets

Rufus Pollock ()

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: A sizable literature has grown up in recent years focusing on two-sided markets in which economies of scale combined with complementarities between a platform and its associated ‘software’ or ‘services’ can generate indirect network effects (that is positive feedback between the number of consumers using that platform and the utility of an individual consumer). In this paper we introduce a model of ‘porting’ in such markets where porting denotes the conversion of ‘software’ or ‘services’ developed for one platform to run on another. Focusing on the case where a dominant platform exists we investigate the impact on equilibrium and the consequences for welfare of the ability to control porting. Specifically, we show that the welfare costs associated with the ‘control of porting’ may be more significant than those arising from pricing alone. This model and its associated results are of particular relevance because of the light they shed on debates about the motivations and effects of actions by a dominant platform owner. Recent examples of such debates include those about Microsoft’s behaviour both in relation to its operating system and its media player, Apple’s behaviour in relation to its DRM and iTunes platform, and Ebay’s use of the cyber-trespass doctrine to prevent access to its site.

Keywords: Network Effects; Two-Sided Markets; Porting; Antitrust; Competition. (search for similar items in EconPapers)
JEL-codes: L12 L13 L15 (search for similar items in EconPapers)
Pages: 24
Date: 2007-11
New Economics Papers: this item is included in nep-com, nep-mic, nep-mkt and nep-net
References: Add references at CitEc
Citations: View citations in EconPapers (4)

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