Strengthening Buyer Power as a Solution to Platform Market Power

By Hugh Mullan & Natalie Timan – 

There are numerous examples of digital platforms with market power. There have been calls to regulate these platforms. This article explores an alternative way of tempering any significant market power by changing the relative bargaining strength of the platform vis-à-vis its customers. The bargaining strength of any customer will depend on the number and strength of the credible outside options available to that customer. Platforms, which are multi-sided in their nature, display network effects. These network effects, in turn, create coordination problems that make it harder for the customers of platforms to switch to outside options. In this way, the potential exercise of buyer power is more limited. Collective bargaining might be one way to solve this coordination problem and in doing so, provide customers with greater bargaining strength. Such collective bargaining will only benefit consumers if the coordination to create or strengthen outside options does not give rise to competition concerns through coordination.

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