Digital Platforms : Does Promoting Competitors Promote Competition?

Digital platforms frequently refer their users to competitors. We show that these references induce a business-sharing effect that may relax competition for users, resulting in lower quality of content. More surprisingly, user surplus may also decrease as the quality effect may overwhelm the positive effect of accessing more content. In the media sector, newspapers delegate the referencing activity to independent third parties. We show that the fees charged by third parties mitigate the anti-competitive effect while preserving the diversity effect. When there is competition among third parties, interplatform references promote both the diversity and quality of content of digital industries