Welfare Effects of Platforms’ Exclusivity Clauses

Abstract Buyers are often active on multiple digital platforms, while gatekeeper platforms can force sellers contractually to use one platform exclusively. This paper considers the welfare effects of such exclusivity clauses for buyers, sellers and platforms in a platform duopoly with a seller membership fee. A setting with partially multihoming buyers and sellers is compared to one with partially multihoming buyers and singlehoming sellers. It is shown that exclusivity clauses predominately harm total welfare. Buyers suffer if sellers are exclusive on one platform, while platforms and sellers benefit from exclusivity clauses under certain conditions. In an environment with exclusivity clauses, when strong cross-group benefits and weak platform differentiation result in fierce price competition, exclusivity clauses can be welfare-enhancing.