American Economic Journal:
Microeconomics
ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)
Compatibility Choices, Switching Costs, and Data Portability
American Economic Journal: Microeconomics
vol. 15,
no. 1, February 2023
(pp. 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.Citation
Jeon, Doh-Shin, Domenico Menicucci, and Nikrooz Nasr. 2023. "Compatibility Choices, Switching Costs, and Data Portability." American Economic Journal: Microeconomics, 15 (1): 30–73. DOI: 10.1257/mic.20200309Additional Materials
JEL Classification
- D11 Consumer Economics: Theory
- D21 Firm Behavior: Theory
- D43 Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection
- D82 Asymmetric and Private Information; Mechanism Design
- L86 Information and Internet Services; Computer Software
There are no comments for this article.
Login to Comment