Working paper

Data Portability and Competition: Can Data Portability Increase both Consumer Surplus and Profits?

Doh-Shin Jeon, and Domenico Menicucci

Abstract

We study how data portability aspects consumer surplus and firms profits in a two-period model with a switching cost where two rms compete under a non-negative pricing constraint. The firms can circumvent the constraint by tying another complementary free service (called "freebies") with the original service. We consider a general framework of incomplete pass-through of freebies into consumer benet, which includes the two extreme cases of no pass through and full pass through. Regarding the effect on consumer surplus, data portability involves a trade-off between intensifying competition after consumer lock-in and reducing rent dissipation before consumer lock-in. For an intermediate range of pass-through rates, data portability increases both consumer surplus and profits.

Keywords

Data Portability, Switching Cost, Non-negative Pricing Constraint; Freebies, Pass-through;

JEL codes

  • D21: Firm Behavior: Theory
  • D43: Oligopoly and Other Forms of Market Imperfection
  • L13: Oligopoly and Other Imperfect Markets
  • L15: Information and Product Quality • Standardization and Compatibility

Reference

Doh-Shin Jeon, and Domenico Menicucci, “Data Portability and Competition: Can Data Portability Increase both Consumer Surplus and Profits?”, TSE Working Paper, n. 23-1450, June 2023.

See also

Published in

TSE Working Paper, n. 23-1450, June 2023