Coase-Sandor Working Paper Series in Law and Economics

Document Type

Working Paper

Publication Date

2024

Abstract

This paper offers a novel legal framework to evaluate competition among digital platforms. Drawing on network science, it debunks two prominent approaches in antitrust law, that network effects either lead to a winner-takes-all situation or, conversely, that they safeguard against platform market power abuses. It coins the term “hub-plucking” to highlight a critical dynamic of platform competition that has surprisingly gone unnoticed: the competition between platforms over highly connected “hubs”. Hub-plucking enables rivaling platforms, including new entrants, to instantly acquire market share by seizing hubs. Since many platforms of interest exhibit hubs, hub-plucking is applicable to a multitude of industries and is thus crucial for competitive analysis. The paper demonstrates the viability of hub-plucking as a major restraint on platform market power. It analyzes the relative advantages of fledgling platforms over dominant ones in acquiring hubs, and provides empirical examples of industries where hub-plucking was successfully implemented to dethrone platform incumbents. Serving as a proof-of-concept for showcasing network science’s enormous potential for advancing antitrust law, the paper last entertains two proposals for expanding antitrust’s arsenal of potential interventions in the platform context.

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