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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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
Divisions: Faculty of Arts and Social Sciences
Depositing User: Uğur Toker Doğanoğlu
Date Deposited: 19 Dec 2006 02:00
Last Modified: 17 Sep 2019 13:30

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