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

Résumé

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.

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Référence

Doh-Shin Jeon et Domenico Menicucci, « Data Portability and Competition: Can Data Portability Increase both Consumer Surplus and Profits? », TSE Working Paper, n° 23-1450, juin 2023.