The Bargaining Robot

Abstract

The primary threat of the rise of the machines is not to competition itself, but to the bargaining power of consumers, given any level of competition in the market. By enabling firms to interact with each consumer on an individual basis, technology will permit firms to tailor price to the highest level each individual consumer is willing to pay and to use tailored marketing to break each consumer’s will to hold out for a better deal, reducing consumer welfare for any given level of competition. By giving consumers more outside options, the promotion of competition can limit the effects of technology-enhanced bargaining power. Antitrust may promote greater competition by reinvigorating merger enforcement and restrictions on exclusionary conduct, embracing no-fault monopolization, banning oligopoly, promoting intrabrand competition, or promoting competition within the firm as a substitute for competition between firms.

Keywords: antitrust, algorithms, robots, big data, analytics, competition, bargaining, no-fault monopolization, oligopoly, intrabrand, internal competition

JEL Classification: L40, K21