In the logistics industry, multiple delivery routes to the same destination enhance reliability. Similarly, in the realm of network-dependent consumerism, the resilience and efficiency of digital consumption rely on the presence of multiple interconnected networks operating harmoniously.

The shift towards digital platforms as the standard business model underscores the perils of depending solely on a single network and a limited number of operators.

A team of researchers, including members from Kyoto University, has delved into the dynamics between consumers who use only one platform (single-homing) and those who engage with multiple platforms (multi-homing). What sets this study apart is the development of a novel analytical framework, a unique tool to assess whether a greater proportion of multi-homing consumers could significantly improve efficiency by merging two business platforms.

Takanori Adachi, from Kyoto University’s Graduate School of Management and Economics, highlighted the study’s connection to the economics of imperfect competition. This area of study, increasingly vital with the progression of information and communication technology, delves into various market-related challenges.

In scenarios where consumers opt for single-homing, the chosen platform invariably assumes a dominant position. However, as the trend towards multi-homing gains traction, it becomes imperative to steer policy directions towards the complexities of digital regulation. This shift is driven by a larger share of consumers embracing multiple platforms, a trend that this study aims to shed light on.

Moreover, Mark Trembley from the University of Nevada, Las Vegas, pointed out that the growing prevalence of multi-homing necessitates more significant reductions in consolidation costs for businesses. It also elevates entry barriers for new entrants in the platform market.

As the prevalence of multi-homing increases, Susumu Sato from Hitotsubashi University underscores the need for competition regulators to be particularly vigilant. In multi-homing contexts, they must be alert to the potential negative impacts of platform mergers and the creation of entry barriers, a challenge that this study aims to address.

The research community often needs help with the challenge of limited data on platform-based businesses.

Takanori Adachi expressed satisfaction with how the study, leveraging economic theoretical models and public databases, succeeded in providing a more lucid understanding of platform economics’ functioning in real-world scenarios. This approach underscores the critical role of theoretical and empirical research in navigating and understanding the complexities of modern digital marketplaces.

More information: Takanori Adachi et al, Platform Oligopoly with Endogenous Homing: Implications for Mergers and Free Entry, Journal of Industrial Economics. DOI: 10.1111/joie.12345

Journal information: Journal of Industrial Economics Provided by Kyoto University