Abstract
The economic and societal roles of digital platforms are a hotly debated topic. They have been under close scrutiny by European competition authorities for a while and their US counterparts have now followed suit. The subject is also receiving increasing attention in the media and in political circles. Each platform raises specific questions, but the general themes are market power, the collection and (mis)use of personal data and related privacy issues, free speech and for some even their possible interference in the political process. Consequently, the call for regulatory or competition policy intervention has become ever more pressing. Various reforms are being considered, including extreme solutions such a dismantlement of the platform. In this chapter, we focus on the issues related to data collection in the e-commerce sector, examine its consequences on equilibrium under several market specifications and different measures that could be implemented to regulate a vertically integrated marketplace. We show that the optimal policy is either complete dismantlement or data sharing. The relative impacts on consumer surplus and total welfare of these two options involve a tradeoff between the increased competition implied by complete dismantlement and the data related delivery cost advantage achieved under data sharing. When this cost advantage is small, completely dismantling dominates, while data sharing is the best policy when the cost advantage is large. Vertical separation is never optimal. While it may or may not yield a larger welfare than the reference scenario, it is always dominated by the two other policies
We thank all the conference participants and in particular our discussant, Lawrence Buc, for their comments. Helmuth Cremer, Jean-Marie Lozachmeur and Estelle Malavolty acknowledge funding received by TSE from ANR under grant ANR-17-EURE-0010 (Investissements d’Avenir program).
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Notes
- 1.
They explained that there are two forms of structural separation: (1) ownership separations, which require divestiture and separate ownership of each business; and (2) functional separations, which permit a single corporate entity to engage in multiple lines of business but prescribe the particular organizational form it must take (p. 379).
- 2.
See the discussions around the future Digital Market Act at the EU level and the report of the United States Subcommittee on antitrust, commercial and administrative law published in October 2020 among others.
- 3.
See for instance the Crémer, de Montjoye and Schweitzer (2019) report on Digital policy for the digital era; the CMA (2020) study into Online platforms and the digital advertising market in the UK; CERRE (2020) report on Data sharing for digital markets contestability: towards a governance framework. Jeon and Lefouili (2020) have shown formally in their paper where firms compete downstream and have to share upstream input that, under general conditions, upstream bilateral agreements giving firms access to one another’s input, like data for instance lead to industry profit maximization.
- 4.
Otherwise, there would be a bias in the comparison across scenarios in favor of complete dismantlement.
- 5.
When the distribution of x is given by \( F(x)=\exp \left(-\exp \left(-\frac{x}{\sigma}\right)\right) \), a smaller σ means that there is a larger probability of x exceeding a given threshold. This can be interpreted as the products supplied being closer substitutes.
- 6.
Even if they would be allowed to differ, these prices would be equal in equilibrium by symmetry. Consequently, our assumption is not necessary, but it is convenient for it simplifies notation.
- 7.
Setting b sufficiently large ensures that utilities are positive. However when the outside option is introduced via an extra variant with a given price rather than a constant utility level, this is of no relevance.
- 8.
A ∗ in a cell means that the variable is not relevant in that scenario.
- 9.
Consumer surplus increases slightly but this is not apparent in the table where only two digits are displayed for the sake of readability.
References
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Borsenberger, C., Cremer, H., Joram, D., Lozachmeur, JM., Malavolti, E. (2022). Data and the Regulation of E-commerce: Data Sharing vs. Dismantling. In: Parcu, P.L., Brennan, T.J., Glass, V. (eds) The Economics of the Postal and Delivery Sector. Topics in Regulatory Economics and Policy. Springer, Cham. https://doi.org/10.1007/978-3-030-82692-5_4
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