Affiliation: Princeton
Title: "Ledgers, Platforms and Interoperability" (with Markus Brunnerneier)
Abstract: This paper studies a supply chain with an incumbent profit maximizing platform that provides both a matching technology and a currency ledger. Bundling these technologies allows the platform to enforce contracts by (i) threatening to seize assets if the financial sector does not report defaulters and (ii) excluding defaulters from financial and trading services. However, by controlling the interoperability to other platforms' ledgers, an incumbent platform can ``lock-in'' customers and by deterring new platform entry increase its market power. Regulation needs to balance preserving synergies in contract enforcement while encouraging new platform entry.