Internet of things (IoT) platform competition: Consumer switching versus provider multihoming

This article aims to address how consumer switching costs and provider multihoming affect competition of emerging consumer IoT data platforms under different market conditions and regulatory schemes. It utilizes agent-based modelling that is especially suitable when decision making is distributed at a micro level while some rules are applied in a centralized fashion. The obtained findings emphasize the role of the regulator in guiding the market. It seems that when switching costs diminish at all sides of the platforms, consumers and service providers will favour the platform with a higher number of users. Further, service provider multihoming mitigates market concentration on both sides of a platform when switching costs are low. Thus, there seems to be a minimum level of interoperability needed to promote market competition. Further, although data portability gives more freedom to consumers in choosing a platform provider, it may result in a winner-takes-all situation due to strong indirect network effects.

Source: Technovation - December 11, 2019 Category: Science Source Type: research