Natural Monopolies in Digital Platform Markets

Francesco Ducci's book explores the theoretical lens of natural monopoly in digital platform markets, investigating the strength and limit of potential sources of natural monopoly through case studies on horizontal search, e-commerce marketplaces, and ride-hailing platforms. It provides general policy implications for digital industries by identifying the respective institutional flaws and shortcomings of ex ante and ex post approaches to market power.

Format: Paperback / softback
Length: 201 pages
Publication date: 07 July 2022
Publisher: Cambridge University Press

The debate surrounding competition policy in digital platform markets often revolves around the notion that market fragmentation and the forces of competition and entry can serve as a potential remedy for excessive concentration and market power. In his work, Francesco Ducci presents a unique perspective by employing the theoretical framework of natural monopoly. Through the exploration of three case studies—horizontal search, e-commerce marketplaces, and ride-hailing platforms—Ducci delves into the strength and limitations of potential sources of natural monopoly within each industry. By building upon these case studies, the book then draws broader policy implications for digital industries by identifying the institutional flaws and shortcomings of both ex ante and ex post approaches to market power, which pose significant challenges in the context of digital platform markets.

Market Fragmentation and Competition Policy in Digital Platform Markets:
The debate surrounding competition policy in digital platform markets often revolves around the notion that market fragmentation and the forces of competition and entry can serve as a potential remedy for excessive concentration and market power. In his work, Francesco Ducci presents a unique perspective by employing the theoretical framework of natural monopoly. Through the exploration of three case studies—horizontal search, e-commerce marketplaces, and ride-hailing platforms—Ducci delves into the strength and limitations of potential sources of natural monopoly within each industry. By building upon these case studies, the book then draws broader policy implications for digital industries by identifying the institutional flaws and shortcomings of both ex ante and ex post approaches to market power, which pose significant challenges in the context of digital platform markets.

The Theoretical Lens of Natural Monopoly:
Francesco Ducci's work takes a different approach by employing the theoretical lens of natural monopoly. This framework allows for a more comprehensive analysis of market dynamics and the potential for monopolistic behavior. By examining the characteristics of industries that exhibit natural monopoly traits, such as high fixed costs, network effects, and product differentiation, Ducci seeks to understand the factors that contribute to market power and how it can be regulated.

Case Studies on Horizontal Search, E-Commerce Marketplaces, and Ride-Hailing Platforms:
Ducci's case studies provide valuable insights into the dynamics of different digital platform markets. Through the analysis of specific industries, he identifies the potential sources of natural monopoly at play and explores how they shape market competition. For example, in the case of horizontal search, he examines how search engines can leverage their market power to influence search results and promote their own products or services. In the e-commerce marketplace, he explores how dominant platforms can use their market position to restrict competition and raise prices. In the ride-hailing platform, he examines how ride-sharing services can create network effects and limit the entry of new competitors.

Policy Implications for Digital Industries:
Building on the case studies, Ducci derives broader policy implications for digital industries. He identifies the respective institutional flaws and shortcomings of ex ante and ex post approaches to market power as one of the central challenges in digital platform markets. Ex ante approaches, which focus on regulating markets before they emerge, may be ineffective in addressing the rapid pace of innovation and change in digital industries. On the other hand, ex post approaches, which focus on regulating markets after they have developed, may be too slow to address emerging issues and may have unintended consequences.

Conclusion:
In conclusion, Francesco Ducci's work provides a valuable contribution to the debate surrounding competition policy in digital platform markets. By employing the theoretical lens of natural monopoly, he offers a different perspective on market dynamics and the potential for monopolistic behavior. Through the exploration of three case studies and the derivation of broader policy implications, Ducci highlights the challenges and complexities of regulating digital industries. His work encourages policymakers and industry stakeholders to consider a more holistic and nuanced approach to competition policy in the digital age.

Weight: 302g
Dimension: 151 x 228 x 15 (mm)
ISBN-13: 9781108811620