Fragile Giants: Reassessing Market Power in Platform Economics

It is widely assumed that platform technology markets are inherently prone to monopoly outcomes in which a single firm or a handful of firms enjoy market power due to network effects and switching costs.  This assumption supports dramatic changes, both proposed and enacted, to the application of competition and antitrust law in platform markets.  Remarkably, this assumption rests on weak empirical support.  The history of technology markets shows that incumbent platforms have been repeatedly challenged successfully by innovative entrants.  Consistent with this pattern, a close examination of the cloud computing market finds little evidence to support assertions of platform entrenchment or user lock-in that would justify intervention by competition regulators.

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