Innovation at Risk? Regulatory Interventions and the Fragility of Digital Platform Ecosystem Performance

Digital platform dominance is reshaping competition policy. We use an agent-based simulation to examine how three families of regulatory levers affect generativity, a proxy for innovation: (1) switching costs for customers and complementors, (2) customer and complementor inertia, and (3) caps on customer share, complementor share, and platform revenue share. We evaluate outcomes with four metrics: dominant-platform revenue share, average service complexity, requirement-fulfilment rate, and market concentration (Herfindahl-Hirschman Index). Switching costs and complementor inertia move these metrics little, and lowering customer inertia can backfire. By contrast, calibrated share caps deliver the most consistent gains. Two settings perform well across all four metrics: limiting a platform to 80% customer share or 70% revenue share, with no cap on complementor share; overly tight limits dampen innovation and competition. Regulators whose goals align with these outcomes should prioritize market-or revenue-share ceilings and deprioritize interventions in switching costs or inertia.