Webinar Synopsis: Tipping in Digital Platform Markets

Economist David Sevy joined speakers from Harvard Business School, the Italian Communications Regulatory Authority, the European University Institute, Cleary Gottlieb and Orrick in a webinar organized by Concurrences.

David Sevy explained why some markets tip and what triggers tipping: a combination of various factors, including strong network externalities, a large dataset and technology which matches different user groups (buyers and sellers for example) effectively, and extreme scale and scope economies permitted by the ability to share and redeploy assets (IT infrastructure, hardware, etc.).

David specified that tipping is usually long-lasting due to a self-reinforcing mechanism: the next generation of users will utilize the same platform as the previous user generation because of the direct benefits of network externalities and indirect benefits of scale and scope economies. This creates barriers to switching platforms because different users would need to coordinate their decision to switch to a different platform. This explains why the disruption of incumbent platforms can be rare despite innovation. He then discussed concerns that winners in tipped markets could engage in exploitative abuses or exclusionary conduct, for example through envelopment strategies by multi-sided platforms, which could lead to sequential market tipping.


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