Usage Lock-In and Platform Competition

39 Pages Posted: 15 Jun 2021 Last revised: 22 Jan 2022

See all articles by Susumu Sato

Susumu Sato

Institute of Economic Research, Hitotsubashi University

Date Written: January 21, 22

Abstract

This article studies platform competition where consumers must choose a single platform to complete a bundle of transactions with sellers rather than for each transaction, which is called as usage lock-in. Usage lock-in induces excessive platform competition by allowing platforms to extract the sellers’ transaction surplus and increasing the platforms' incentive to attract usage. Consequently, usage lock-in benefits consumers, hurts sellers, and often benefits platforms. In the long run, usage lock-in may even hurt consumers by discouraging seller investments. These results provide a rationale for policy intervention in response to platform strategies that benefit consumers at the expense of sellers.

Keywords: Two-sided markets, multihoming, competition-in-utility, excessive competition

JEL Classification: L13, L81

Suggested Citation

Sato, Susumu, Usage Lock-In and Platform Competition (January 21, 22). Available at SSRN: https://ssrn.com/abstract=3864942 or http://dx.doi.org/10.2139/ssrn.3864942

Susumu Sato (Contact Author)

Institute of Economic Research, Hitotsubashi University ( email )

Tokyo
Japan

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