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Can data openness unlock competition when the incumbent has exclusive data access for personalized pricing?

Author

Listed:
  • Rosa Branca Esteves

    (Universidade do Minho and NIPE)

  • Francisco Carballo-Cruz

    (Universidade do Minho and NIPE)

Abstract

This paper investigates the role of an incumbent´s data investment decisions in shaping the competitive interaction of firms and market structure. We provide antitrust agencies with some insights that may help them to determine whether and when personalized pricing (PP) by a dominant firm, which is enabled by the use of exclusive data, dampens competition and harms consumers. In markets with intermediate entry costs, where entry is blocked without any intervention, a data openness remedy, by means of a mandatory information sharing, is an effective tool to restore competition and boost consumer welfare. Even in markets where entry is inevitable, due to low entry costs, a mandatory information sharing to promote competitive PP further boosts consumer surplus in comparison to the case where only the incumbent employs PP. In contrast, public agencies should consider a ban on PP in markets with sufficiently high entry costs. In these markets, a mandatory information sharing remedy would simply not produce the desired competitive outcome.

Suggested Citation

  • Rosa Branca Esteves & Francisco Carballo-Cruz, 2021. "Can data openness unlock competition when the incumbent has exclusive data access for personalized pricing?," NIPE Working Papers 16/2021, NIPE - Universidade do Minho.
    • Handle: RePEc:nip:nipewp:16/2021
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    File URL: http://repositorium.sdum.uminho.pt/handle/1822/75845
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    Cited by:

    1. Shuaicheng Liu, 2023. "Location choice with asymmetric data in the Hotelling model," International Journal of Economic Theory, The International Society for Economic Theory, vol. 19(4), pages 855-878, December.

    More about this item

    Keywords

    Price discrimination; data investments; data barrier to entry; information; sharing; digital markets; GDPR; competition policy and regulation.;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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