Monday, February 25, 2008
Competition and Regulatory Policy Towards Multi-Sided Platform Businesses with Applications to the Internet Economy
Posted by D. Daniel Sokol
David Evans of University College London Faculty of Law and LECG brings us his latest working paper Competition and Regulatory Policy Towards Multi-Sided Platform Businesses with Applications to the Internet Economy.
ABSTRACT: A multi-sided platform (MSP) unleashes the hidden value from getting different customer groups together on the same platform and getting them to interact. Economists now understand that exchanges, payment systems, software platforms, video game consoles, advertising-supported media, shopping malls and many other industries are populated by MSPs. The linkage between the multiple sides has significant implications for profit-maximization and competitive strategies followed by businesses and for how competition authorities and regulators should analyze these businesses. In this paper, I discuss the economic and strategic aspects of MSPs that are likely to be relevant to regulators, competition authorities and other policymakers. I also examine the basic economic features of MSPs and the business strategies that these features lead to and the key issues concerning competition and regulatory policy. I then provide an overview of web-based MSPs, which are likely to be the subjects of investigations and inquiries, and conclude with thoughts for the future.