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Data and Competition: a Simple Framework with Applications to Mergers and Market Structure

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  • de Cornière, Alexandre
  • Taylor, Greg

Abstract

What role does data play in competition? This question has been at the center of a fierce debate around competition policy in the digital economy. We provide a simple framework for studying the competitive effects of data, encompassing a wide range of applications (product improvement, targeted advertising, price-discrimination) using a competition-in-utilities approach. We model data as a revenue-shifter, and identify conditions for data to be pro- or anti-competitive. The conditions are simple and often do not require knowledge of market demand or calculation of equilibrium. We use this framework to address policy-relevant questions related to market structure and data-driven mergers. We show that the effects of a data-driven merger between firms operating on adjacent markets depend both on whether data is pro- or anti-competitive and on firms' ability to trade data absent the merger.

Suggested Citation

  • de Cornière, Alexandre & Taylor, Greg, 2022. "Data and Competition: a Simple Framework with Applications to Mergers and Market Structure," CEPR Discussion Papers 14446, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:14446
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    Cited by:

    1. Legros, Patrick & ,, 2022. "The Sale of Data: Learning Synergies Before M&As," CEPR Discussion Papers 17404, C.E.P.R. Discussion Papers.
    2. Gregor Langus & Vilen Lipatov, 2021. "Does Envelopment through Data Advantage Call for New Regulation?," CESifo Working Paper Series 8932, CESifo.
    3. Ehsan Valavi & Joel Hestness & Marco Iansiti & Newsha Ardalani & Feng Zhu & Karim R. Lakhani, 2022. "Time Dependency, Data Flow, and Competitive Advantage," Papers 2203.09128, arXiv.org.
    4. Jullien, Bruno & Sand-Zantman, Wilfried, 2021. "The Economics of Platforms: A Theory Guide for Competition Policy," Information Economics and Policy, Elsevier, vol. 54(C).
    5. Budzinski, Oliver & Gänßle, Sophia & Stöhr, Annika, 2020. "The draft for the 10th amendment of German competition law: Towards a new concept of "Outstanding relevance across markets"?," Ilmenau Economics Discussion Papers 142, Ilmenau University of Technology, Institute of Economics.
    6. Stefano Colombo & Clara Graziano & Aldo Pignataro, 2023. "Personalized Pricing with Imperfect Customer Recognition," CESifo Working Paper Series 10455, CESifo.
    7. Flavio Pino, 2022. "The microeconomics of data – a survey," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 49(3), pages 635-665, September.
    8. DELBONO Flavio & REGGIANI Carlo & SANDRINI Luca, 2021. "Strategic data sales to competing firms," JRC Working Papers on Digital Economy 2021-05, Joint Research Centre.
    9. Shota Ichihashi & Byung-Cheol Kim, 2023. "Addictive Platforms," Management Science, INFORMS, vol. 69(2), pages 1127-1145, February.
    10. MARTENS Bertin, 2020. "An economic perspective on data and platform market power," JRC Working Papers on Digital Economy 2020-09, Joint Research Centre.
    11. Alessandro Bonatti, 2023. "The Platform Dimension of Digital Privacy," NBER Chapters, in: The Economics of Privacy, National Bureau of Economic Research, Inc.
    12. Shota Ichihashi, 2021. "Competing data intermediaries," RAND Journal of Economics, RAND Corporation, vol. 52(3), pages 515-537, September.
    13. Yiquan Gu & Leonardo Madio & Carlo Reggiani, 2022. "Data brokers co-opetition [The impact of big data on firm performance: an empirical investigation]," Oxford Economic Papers, Oxford University Press, vol. 74(3), pages 820-839.
    14. Guy Aridor & Yishay Mansour & Aleksandrs Slivkins & Zhiwei Steven Wu, 2020. "Competing Bandits: The Perils of Exploration Under Competition," Papers 2007.10144, arXiv.org, revised Dec 2022.
    15. Jean-Marc Zogheib & Marc Bourreau, 2021. "Privacy, Competition, and Multi-Homing," EconomiX Working Papers 2021-15, University of Paris Nanterre, EconomiX.
    16. Zhijun Chen & Chongwoo Choe & Jiajia Cong & Noriaki Matsushima, 2022. "Data‐driven mergers and personalization," RAND Journal of Economics, RAND Corporation, vol. 53(1), pages 3-31, March.
    17. Strausz, Roland, 2022. "Correlation-Savvy Sellers," Rationality and Competition Discussion Paper Series 347, CRC TRR 190 Rationality and Competition.
    18. Yiquan Gu & Leonardo Madio & Carlo Reggiani, 2019. "Exclusive Data, Price Manipulation and Market Leadership," CESifo Working Paper Series 7853, CESifo.
    19. Martin Peitz, 2023. "Governance and Regulation of Platforms," CRC TR 224 Discussion Paper Series crctr224_2023_480, University of Bonn and University of Mannheim, Germany.
    20. Gregor Langus & Vilen Lipatov, 2022. "Value Creation by Ad-Funded Platforms," CESifo Working Paper Series 9525, CESifo.
    21. Bertin Martens & Alexandre de Streel & Inge Graef & Thomas Tombal & Nestor Duch-Brown, 2020. "Business-to-Business data sharing: An economic and legal analysis," JRC Working Papers on Digital Economy 2020-05, Joint Research Centre.
    22. CARBALLA SMICHOWSKI Bruno & DUCH BROWN Nestor & GOMEZ LOSADA Alvaro & MARTENS Bertin, 2021. "When ‘the’ market loses its relevance: an empirical analysis of demand-side linkages in platform ecosystems," JRC Working Papers on Digital Economy 2021-07, Joint Research Centre.
    23. Ichihashi, Shota, 2021. "The economics of data externalities," Journal of Economic Theory, Elsevier, vol. 196(C).
    24. Ehsan Valavi & Joel Hestness & Newsha Ardalani & Marco Iansiti, 2022. "Time and the Value of Data," Papers 2203.09118, arXiv.org.
    25. Shota Ichihashi, 2020. "Non-competing Data Intermediaries," Staff Working Papers 20-28, Bank of Canada.

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    More about this item

    Keywords

    Competition; Big data; Data-driven mergers; Privacy;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L4 - Industrial Organization - - Antitrust Issues and Policies
    • L5 - Industrial Organization - - Regulation and Industrial Policy

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    This paper has been announced in the following NEP Reports:

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