Interconnection among Electronic
Academic Journal Platforms: Multilateral
versus Bilateral Interconnection
Doh-Shin Jeon (UPF, IESE (SP-SP),TSE)
Domenico Menicucci (Universita di Firenze)
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Interconnection among Electronic
Academic Journal Platforms
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Some background about the market
for academic journals

Move from print journals to electronic journals raises
several fundamental issues:
(1) Move from ''no bundling and no discrimination'‘ to
''bundling and discrimination'': Jeon-Menicucci (JEEA,
2006)
(2) Open access journals: Jeon-Rochet (2007)
(3) Interconnection (=interoperability) : this paper
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Several public reports on the market
for academic journals



-
UK House of Commons Science and Technology
Committee (2004)
OECD (2005)
Mathias Dewatripont etc. (2006)
Commissioned by EC
Section 9 is about interoperability
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“Interactive” electronic academic journals are
much more than print journals

-
-
New technology for data and text mining, data and text
linking (such as cross reference) etc. significantly
increases the value added from interconnection
among electronic journal platforms
In biology, there is a software which can recognize a
two-dimensional image of a molecule and search for
all the articles studying the same molecule
You can enhance the texts of an article by providing
links to URLs or databases
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Future in biology
“One ultimate goal is “automatically generated
knowledge layers” which will be overlaid on the
electronic text and offer a quick route to connecting a
paper with other relevant material – whether it is
genes, proteins, metabolic markers etc.”
(Martin Hofmann, Frauhofer Institute of Algorithms and Scientific
Computing)
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Anti-competitive issue
''... RE might try to undermine its competitors by
denying them links with ScienceDirect, ...'‘
(U.K. Competition Commission (2001), p.22)
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CrossRef

A not-for-profit citation linking backbone
offering a reference linking service that allows
users to click on a citation and be taken
directly to the target content.
 A success story: It has more than 1,462
participating publishers and societies.
 It allows publishers to avoid bilateral linking
agreements: a single agreement with
CrossRef serves as a linking agreement with
all participating publishers
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Objective of this paper

To compare the multilateral interconnection
regime à la CrossRef with a bilateral
interconnection regime in terms of
(1) Incentive to interconnect
(2) Profits
(3) Welfare
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Main results


Publishers are fully interconnected under the
multilateral interconnection regime but often partially
interconnected under the bilateral one for exclusion
or differentiation motives
If partial interconnection occurs for differentiation
motive, exclusion of small publisher(s) occurs more
often under the multilateral interconnection than under
the bilateral one
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Literature review



Compatibility among networks: Katz-Shapiro (1985),
Farrell and Saloner (1985, 1986)
Interconnection through two-way access pricing
among telecommunication networks: Armstrong (1998)
and Laffont-Rey-Tirole (1998a,b) etc
Interconnection among Internet Backbone companies
(IBP): Crémer-Rey-Tirole (2000) and Laffont-MarcusRey-Tirole (2003)
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Our contribution to the literature

To study a multilateral interconnection and to
compare it with a bilateral one.
 Interconnection among academic journal
platforms
 Application to Interconnection among Internet
Backbone Companies (IBP)
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Model

We build on Jeon-Menicucci (JEEA, 2006):
Each publisher practices bundling
 Players: 3 asymmetric profit-maximizing
publishers and one representative library
 3 games
(1) m: Multilateral interconnection game à la
CrossRef
(2) b: Billateral interconnection game à la
CrossRef
(3) 0: game without interconnection
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Model
Multilateral
Bilateral
Interconnection Interconnection
Sequential
timing
O
O
Simultaneous
timing
O
X
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Timing of m (Multilateral interconnection
game à la CrossRef)
Sequential
Interconnection
Simultaenous
pricing
Stage 1
Stage 2
Stage 3
1 decides
to be
active or
not and, if
active,
x1=1 or
x1=0
2 decides
to be
active or
not and, if
active,
x2=1 or
x2=0
3 decides
to be
active or
not and, if
active,
x3=1 or
x3=0
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Stage 4
Each
active i
chooses
Pi
Stage 5
The
library
chooses
bundles
to buy
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Timing of b (Bilateral interconnection
game)
Simultaneous
Pricing
Sequential
Interconnection
Stage 1
Stage 2
Stage 3
1 decides
to be
active or
not and, if
active,
x1j=1 or
x1j=0
2 decides
to be
active or
not and, if
active,
x2j=1 or
x2j=0
3 decides
to be
active or
not and, if
active,
x3j=1 or
x3j=0
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Interconnection among Electronic
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Stage 4
Each
active i
chooses
Pi
Stage 5
The
library
chooses
bundles
to buy
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Timing of 0 (the game without
interconnection)
Simultaneous
Pricing
Sequential decision
to be active or not
Stage 1
Stage 2
Stage 3
1 decides
to be
active or
not
2 decides
to be
active or
not
3 decides
to be
active or
not
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Stage 4
Each
active i
chooses
Pi
Stage 5
The
library
chooses
bundles
to buy
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Interconnection

yij=1 (yij=0) : Platforms i and j are
interconnected (not interconnected)
 Under the multilateral interconnection regime:
yij=1 iff xi=1 and xj=1
 Under the bilateral interconnection regime:
yij=1 iff xij=1 and xji=1
 y=(y12,y13,y23)
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Publishers
Publisher i’s profit is Pi
 The fixed cost of making the first copy of an
article was already incurred.
 Zero marginal cost of distribution.
 Zero cost of interconnection

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Library





Has a fixed budget M(>0) for journals
Quasi-linear utility function
Stand-alone utility from Bundle i:
U1>U2>U3>0
Additional utility from Interconnection
(economies of scale): I12>I13>I23>0
Utility from buying bundles 1 and 2:
U1+U2+I12y12-P1-P2
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Assumptions and a tie-breaking rule

Perfect information on utilities and budget
 M<U-I12 where UU1+U2+U3: implies that the
industry profit is equal to M
 A1: U1>U2+I23, U2>U3+I13 , U3>I12
 Tie-breaking rule: A publisher is active only if it
expects to have a strictly positive profit.
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One basic result (Lemma 1)

A1 implies that
- If 3 is active, 1 and 2 are active
- If 2 is active, 1 is active
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Pricing game given interconnection
profile y
U1  U 2
M ( y)
M
Only 1 can
earn a
positive profit
equal to M
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Only 1 and 2
can earn a
positive
profit. Their
profits do not
depend on y
All three earn
a positive
profit. Profits
depend on y
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D
1
D
2
Duopoly prices ( P , P )

Determined by
P1  P2  M
U1  P1  U 2  P2

They do not depend on interconnection
profiles
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Prices when all three compete: PiT(y)

Determined by
M  P1  P2  P3
U1  U 2  I12 y12  P1  P2  U1  U 3  I13 y13  P1  P3
U1  U 2  I12 y12  P1  P2  U 2  U 3  I 23 y23  P2  P3

They depend on the interconnection profile:
P1T(y) increases with y12 and y13 and
decreases with y23
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0 (the game without interconnection)
U1  U 2
M (0,0,0)
M
A*={1}
P1*  M
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A*={1,2}
P1*  P1D , P2*  P2D
A*={1,2,3}
Pi*  PiT (0,0,0)
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One basic result regarding incentive
to interconnect

y=(y12,y13,y23)=(1,0,0) is the least favorable for
3.
 If M>M(1,0,0), 3 makes a positive profit for any
interconnection profile
 Then, all publishers fully interconnect
regardless of the mode of interconnection.
 Question: What happens for MM(1,0,0)?
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m (Multilateral interconnection game à la
CrossRef): Incentive to interconnects

(0,1,0) is the most favorable interconnection
profile for 3 under m
 If MM(0,1,0), 3 cannot make a positive profit
for any possible y under m. Hence, we
consider M>M(0,1,0).
 Lemma 3: For each publisher, interconnection
is a best response and sometimes the unique
one.
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m (Multilateral interconnection game à la
CrossRef): Equilibrium
P1*  P1D , P2*  P2D
A*={1,2}
M (0,1,0)
0
Pi *  Pi T (0,0,0)
A*={1,2,3}
M (0,0,0)
M (1,1,1)
A*={1,2}
M
A*={1,2,3}
P1*  P1D , P2*  P2D
Pi*  PiT (1,1,1)
m
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m (Multilateral interconnection game à la
CrossRef): Intuition
More exclusion of 3 under m than under 0 becase of
the economies of scale
 Exclusion motive does not modify the incentive to
interconnect
- If 1 chooses x1=0, 2 and 3 respond by x2=x3=1. Hence,
x1=0 only worsens 1’s relative standing.

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b (Bilateral interconnection game): results

If MM(0,1,1), 3 cannot make a positive profit for any
possible y under b. Hence, we consider M>M(0,1,1).
 Main result: Partial interconnections may arise for two
different motives, exclusion or differentiation motive
(1) Exclusion motive: If 1 and 2 are similar but 2 is much
larger than 3, 1 or 2 excludes 3 by breaking
connectivity with 3
(2) Differentiation motive: If 2 and 3 are similar but 1 is
much larger than 3, 1 breaks connectivity with 2 but
maintains connectivity with 3 in order to differentiate
itself with respect to 2.
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Comparing 0, m and b
A*={1,2}
A*={1,2,3} & y*=(0,0,0)
A*={1,2}
A*={1,2,3} & y*=(1,1,1)
A*={1,2,3} & y*=(0,1,1)
M(0,0,0)
m
b when
4I23≥3I13
A*={1,2}
M(0,1,0)
0
M(1,1,1)
b when
3I13>2I12+4I23
M(1,1,0)
M
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Social welfare
SW coincides with the library’s payoff.
 Under A1, SW is first determined by the
number of active publishers and then by the
level of interconnection
 As long as A* is the same, the multilateral
regime is at least weakly the best.
 Otherwise, no interconnection regime or the
bilateral regime can be optimal

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Symmetric publishers with
sequential interconnection


(1)
(2)
Under the multilateral interconnection regime, all
publishers are active and fully interconnected
Under the bilateral regime
If M<I, two possible outcomes in which either 2 or 3
is excluded.
Otherwise, the unique equilibrium as in the
multilateral regime
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Robustness: the multilateral
interconnection

The outcome of the sequential interconnection game
is equivalent to that of the simultaneous
interconnection game

The results of both games extend to the case of any
number of heterogeneous libraries
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Application to Interconnection among IBPs à la
Crémer-Rey-Tirole (2000)

CRT consider the bilateral interconnection game
through peering among 3 IBPs with the market
shares in terms of the installed base
1 1 1
( 1 ,  2 ,  3 )  ( , , )
2 4 4

(i)
(ii)

Differences between their model and ours:
Cournot (Market expansion) versus Salop
Single-homing versus multi-homing
They show under certain parameter conditions, 1
interconnects only with 2 to prevent 3 from gaining
any new customer.
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Application to Interconnection among IBPs à la
Crémer-Rey-Tirole (2000)

Consider
( 1 ,  2 ,  3 )  ( 1 ,

1  1 1  1
,
)
2
2
There exists 1*>1/2 such that under the
multilateral interconnection regime, all IBPs
fully interconnect for any 1  1*.
1
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Conclusion





Interconnection (or interoperability) among different electronic
platforms is a very important issue in general and in particular, in
the case of academic journals.
The multilateral interconnection provides much stronger incentive
to interconnect than the bilateral one
Our insight can be applied to Interconnection among Internet
Backbone companies.
A surprising result is that exclusion may occur more often under
the multilateral regime than under the bilateral regime and hence
SW may be higher under the latter
A general message: Allowing firms to have finer instruments to
discriminate makes interconnection more difficult than banning
the discrimination (Jeon, Laffont, Tirole, RJE, 2005)
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