How Platforms Create Value Through Coring and Implications for Market Definition
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ARTICLE SUMMARY
Digital platforms coordinate interactions between user groups, an activity known as "coring." When analyzing coring conduct, antitrust courts should avoid defining the platform’s market too narrowly.
POLICY RELEVANCE
If courts define markets too narrowly, platforms’ monopoly power will be exaggerated.
KEY TAKEAWAYS
- A platform acts as a “core” for interactions between user groups by adopting policies and technologies to build trust, facilitate interactions between user groups, and offer incentives to continue using the platform.
- Coring activities include the creation of rating systems or limitations on the types of products available.
- Usually, coring activities reduce search and transaction costs for users.
- Coring activities include the creation of rating systems or limitations on the types of products available.
- In coring, a platform might adopt policies that restrict some users, but that improve the platform as a whole; for example, Uber might remove drivers with bad reviews, increasing the value of Uber to drivers and passengers in the long run.
- When a platform faces competition, it should evolve its coring efforts continuously; if the platform fails to adapt and correct policies to maintain trust, users’ trust will erode.
- In 2018, in Ohio v. American Express Co., the Supreme Court introduced the concept of a “transaction platform” to antitrust law.
- “Transaction platforms” are platforms where the interactions between two-sided platforms' user groups can be observed.
- The transaction platform facilitates and manages interactions between user groups.
- “Transaction platforms” are platforms where the interactions between two-sided platforms' user groups can be observed.
- A newspaper serves both readers and advertisers, but is not a transaction platform, because interactions between readers and advertisers cannot be observed or managed by the newspaper.
- In antitrust cases, courts begin by defining the market to better understand customers’ alternatives; courts often confuse platforms' coring actions with the outer boundaries of the market, defining the market much too narrowly.
- For example, suppose a fish market runs an electronic auction for lots of fish to facilitate interactions between buyers and sellers; the fish market’s power is limited by the possibility that buyers and sellers will find other ways to interact.
- The market should be defined broadly, as the facilitation of interactions between fish sellers and buyers.
- The court might define the market too narrowly, as the provision of an auction service for fish.
- The market should be defined broadly, as the facilitation of interactions between fish sellers and buyers.
- If the court defines a coring platform’s market too narrowly, the court will wrongly conclude that the platform has a monopoly, and the court will fail to appreciate the benefits of the coring activity.
- Courts should recognize that platforms' role is to bring together different user groups and manage the groups’ interactions by coring; however, coring activities do not themselves constitute a market.
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About Catherine Tucker
Catherine Tucker is the Sloan Distinguished Professor of Management and Professor of Marketing at Massachusetts Institute of Technology Sloan School of Management. She is also Chair of the MIT Sloan PhD Program. Her research interests lie in how technology allows firms to use digital data to improve their operations and marketing and in the challenges this poses for regulations designed to promote innovation. She has particular expertise in online advertising, digital health, social media and electronic privacy.
