aeaweb.org
Competitive Bottlenecks and Platform Spillovers
(Forthcoming Article) - We provide a general framework to analyze competition between
oligopolistic platforms in competitive bottleneck settings, allowing
for pricing and non-price design choices by platforms, and postparticipation
buyer-seller decisions. We show that equilibrium
choices by platforms are distorted against sellers’ interests in a
way harmful to welfare (e.g., setting excessive commission fees),
and that an increase in the number of competing platforms can
exacerbate this distortion. We also characterize how buyer-side
heterogeneity in interaction benefits, partial market coverage, platform
asymmetry, and cross-platform spillovers further amplify or
mitigate welfare distortions. Based on our findings, we discuss
policy implications for mobile app platforms.
