Platform Competition and Interoperability : The Net Fee Model

We study the effects of competition and interoperabilty in platform markets. To do so, we adopt an approach of competition in net fees, which is well-suited to situations where users pay additional charges, after joining, for on-platform interactions. Compared to other approaches, net fees expand the tractable scope to allow platform asymmetry and variable total demand. Regarding competition, our findings raise two concerns: adding more platforms may lead to market contraction or the emergence of a dominant firm. In contrast, we find that interoperability can play a key role in boosting user participation and reducing market dominance