Enforced compatibility and control of switching costs in markets with network externalities: an experiment
Enforced compatibility and control of switching costs in markets with network externalities: an experiment

Summary/Abstract: We experimentally investigate two competition policy measures relevant for markets with network externalities: mandating technological compatibility and lowering the cost of switching between providers. We do so in a virtual market with the roles of both sellers and buyers being played by student subjects. We find only limited support for usefulness of the analyzed measures: our treatment manipulations have no effect on sellers’ pricing strategies. They do, however, reduce individual lock-in, helping the buyers to obtain the currently cheaper variant and thus increase customers’ welfare.

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