Data Neutrality, Data Supply, and Market Competition

We analyze the effects of data neutrality regulations on downstream market competition, the incentive of the platform to produce data, and consumer welfare. In our framework, data neutrality requires that firms seeking access to the platform’s data be treated equally, irrespective of whether they are affiliated with the platform. We consider two forms of regulation. Under weak data neutrality, the platform must provide the same amount of data to affiliated and unaffiliated sellers; under strong data neutrality, it must also charge the same price. We show that weak data neutrality can be largely ineffective, as the platform may restore exclusion through discriminatory pricing. Strong data neutrality is more consequential, but it does not necessarily raise welfare. Although it broadens access and intensifies downstream competition, it also reduces the incentive of the platform to refine and produce data. Consequently, data neutrality can reduce the equilibrium amount of data available in the market, and this data-reduction effect can dominate its benefits, which enhance competition. These findings suggest that regulating access to platform data requires balancing fair competition against the incentive to generate valuable data inputs.