Thread by @BrunoCarballa

📣🚨 New article🚨📣

Do digital #ecosystems render traditional market definition (TMD) obsolete? In our new @EU_ScienceHub empirical WP (bit.ly/3DefTti) we argue that this approach is not obsolete, but needs to be complemented with alternative ones. Here is why 👇🧵

First of all, 𝘄𝗵𝗮𝘁 𝗮𝗿𝗲 𝗲𝗰𝗼𝘀𝘆𝘀𝘁𝗲𝗺𝘀? “A set of actors with varying degrees of multilateral, 𝘯𝘰𝘯𝘨𝘦𝘯𝘦𝘳𝘪𝘤 complementarities that are not fully hierarchically controlled" (@jacobides, @CarmeloCennamo, & @AnnabelleGawer, 2018, emphasis added).

⚠ Vocabulary caveats. In the paper:

a) "nongeneric complementarities in consumption'' = "demand-side linkages"

b) ''traditional market definition'' = ''substitutability approach''

And 𝘄𝗵𝗮𝘁 𝗶𝘀 ''𝘁𝗿𝗮𝗱𝗶𝘁𝗶𝗼𝗻𝗮𝗹 𝗺𝗮𝗿𝗸𝗲𝘁 𝗱𝗲𝗳𝗶𝗻𝗶𝘁𝗶𝗼𝗻''? Defining a relevant market (RM) made of substitute products (e.g. running shoes aren't substitutes for high heels). 𝘛𝘩𝘦 RM is the only arena of competition between pure rivals.

Also, with TMD 𝘵𝘩𝘦 market is 𝘵𝘩𝘦 scope of welfare effects: only consumers and producers of the substitutable products of the RM are affected by the outcome of competition in it. Then, regulation and #antitrust should focus only on 𝘵𝘩𝘦 RM. This takes us to the problems👇

𝗧𝗵𝗲 𝗽𝗿𝗼𝗯𝗹𝗲𝗺𝘀 (1/3). The ecosystems literature claims that non-generic complementarities between firms active in 𝘥𝘪𝘧𝘧𝘦𝘳𝘦𝘯𝘵 markets (e.g. smart TVs and TV apps) exist. Then, interdependencies between 𝘴𝘦𝘷𝘦𝘳𝘢𝘭 markets have to be taken into account.

𝗧𝗵𝗲 𝗽𝗿𝗼𝗯𝗹𝗲𝗺𝘀 (2/3). Competitive relationships between firms of the same ecosystem can range from pure cooperation to pure competition, including coopetition. Hence, competitors and coopetitors can exist 𝘰𝘶𝘵𝘴𝘪𝘥𝘦 of a relevant market made of substitutable products

𝗧𝗵𝗲 𝗽𝗿𝗼𝗯𝗹𝗲𝗺𝘀 (3/3). If this is true, then traditional MD, based on defining a single relevant market on the bases of substitutes is inadequate to do competition and regulatory analysis of ecosystems. This is so if the answers to our research questions (RQs) is 'Yes'👇

𝗥𝗤𝘀 (1/2)
1/ Are demand-side linkages prevalent in the platform economy?
2/Are demand-side linkages cross-market?

𝗥𝗤𝘀 (2/2)
3/ Are platform ecosystems made of complementary firms belonging to the same industry?
4/ Is competition for the value created by complementors (i.e. coopetition) prevalent in ecosystems?

𝗠𝗲𝘁𝗵𝗼𝗱𝗼𝗹𝗼𝗴𝘆. We develop a methodology to measure demand-side linkages and classify competitive relationships btw firms. We apply it to the major 246 European digital #platforms using 2020 internet traffic data from @Similarweb (details here: bit.ly/3DefTti ).

𝗥𝗲𝘀𝘂𝗹𝘁𝘀 (1/4). RQ1/ Yes, demand-side linkages are prevalent in the EU platform economy. We find demand-side linkages between 18% of the major European platforms and 31% of the major parent platforms. Each of the painted areas (clusters) below is a demand-side ecosystem 👇

𝗥𝗲𝘀𝘂𝗹𝘁𝘀 (2/4). RQ2/ ''Not so much''. In 52% of the cases, demand-side linkages are not cross-market.

𝗥𝗲𝘀𝘂𝗹𝘁𝘀 (3/4). RQ3/ Most of the times, yes, platform ecosystems are made of complementary firms from the same industry. But we also find interesting industry-agnostic ecosystems. Check out the jeuxvideo (upward left) and seznam (center left) clusters 2 tweets before☝️

𝗥𝗲𝘀𝘂𝗹𝘁𝘀 (4/4). ''Not so much''. Although coopetition is prevalent, in 52% of the cases firms competing in the same market belong to the same ecosystem.

𝗖𝗼𝗻𝗰𝗹𝘂𝘀𝗶𝗼𝗻𝘀 (1/2). Traditional MD is useful to analyse platform ecosystems, but it requires adaptations. First, defining relevant 𝘮𝘢𝘳𝘬𝘦𝘵𝘴 instead of a single relevant market to capture the entire scope of the welfare effects of competition in a market.

𝗖𝗼𝗻𝗰𝗹𝘂𝘀𝗶𝗼𝗻𝘀 (2/2). Second, considering more complex competitive relations: demand-side linkages between competitors active in the same relevant market and potential competitors in an unrelated or complementary market (➡️risk of “envelopment”)

If this🧵interested you, you can find the full article in open access here: bit.ly/3DefTti Questions, comments and feedback are more than welcome!