Data-driven mergers and personalization

This paper studies tech mergers that involve a large volume of consumer data. The merger links the markets for data collection and data application through a consumption synergy. The merger-specific efficiency gains exist in the market for data application due to the consumption synergy and data-enabled personalization. Prices fall in the market for data collection due to the merged firm's incentives to expand its outreach in the market for data application. But in the market for data application, prices generally rise as the efficiency gains are extracted away through personalized pricing, rather than being passed on to consumers. When the consumption synergy is large enough, the merger can result in monopolization of both markets, with further consumer harm when stand-alone competitors exit in the long run. We discuss policy implications including various merger remedies.