Overview of Network Effects & Platforms in Digital Markets

Abstract

In this chapter, we address a number of foundational questions. What exactly are platforms? How do platforms relate to the various types of network effects? Importantly, do we need different tools to assess potential anticompetitive conduct that involves platforms?

Specifically, we begin with a discussion of the various types of network effects, as these effects are integral to understanding the nature of platforms. Next, we consider platforms more from the perspective of incentives rather than an overt focus on a standardized definition. We also discuss how platforms compete, including discussions of “zero-price” markets and the associated idea of “attention” markets. Finally, we offer some guidance on some relevant economic issues to consider when assessing platform markets in the context of antitrust cases.