Effects of open and closed systems on competition

17 Dec 2014 02:50 PM

The CMA and the French Autorité de la concurrence have jointly published a report on the economics of open and closed systems.

The report looks at the effects of open and closed systems and the implications of competition between these systems. It focuses on ecosystems comprising of different products and services that work together in a combined way. Well-known examples which form such an ecosystem include mobile devices, operating systems, and various services (music, e-books, applications, and application stores).

The report highlights some of the relevant economic literature and different factors that determine the effects of open and closed systems on competition.

It shows that the effects should be assessed case by case, depending on, for example:

• the degree of competition between systems
• the ease with which consumers can switch between systems
• the degree of coordination required to ensure a system’s viability
• the ability of consumers to assess the overall cost associated with a system before making a choice