Jeon, Doh-Shin and Menicucci, Domenico (2023) Data Portability and Competition: Can Data Portability Increase both Consumer Surplus and Profits? TSE Working Paper, n. 23-1450, Toulouse

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Abstract

We study how data portability aspects consumer surplus and firms profits in a two-period model with a switching cost where two rms compete under a non-negative pricing constraint. The firms can circumvent the constraint by tying another complementary free service (called "freebies") with the original service. We consider a general framework of incomplete pass-through of freebies into consumer benet, which includes the two extreme cases of no pass through and full pass through. Regarding the effect on consumer surplus, data portability involves a trade-off between intensifying competition after consumer lock-in and reducing rent dissipation before consumer lock-in. For an intermediate range of pass-through rates, data portability increases both consumer surplus and profits.