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Multihoming and compatibility

Doğanoğlu, Toker and Wright, Julian (2006) Multihoming and compatibility. International Journal of Industrial Organization, 24 (1). pp. 45-67. ISSN 0167-7187

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Official URL: http://dx.doi.org/10.1016/j.ijindorg.2005.07.004

Abstract

When competing firms make their services compatible, consumers enjoy greater network benefits. These benefits can also be realized if firms remain incompatible and consumers multihome by purchasing from each of the firms. We find that such multihoming may be a poor substitute for compatibility. Multihoming weakens competition and introduces costs that firms do not internalize. As a result, multihoming can increase the social desirability of compatibility, while making compatibility less attractive for firms. Surprisingly, policymakers should generally be more concerned about the lack of compatibility when multihoming is present. Our results extend to two-sided markets.

Item Type:Article
Uncontrolled Keywords:multihoming; compatibility; network effects; standards; two-sided markets
Subjects:H Social Sciences > HF Commerce
ID Code:205
Deposited By:Uğur Toker Doğanoğlu
Deposited On:19 Dec 2006 02:00
Last Modified:31 Aug 2010 11:42

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