Competition by Design

10 Pages Posted: 25 Nov 2017

Multiple version iconThere are 2 versions of this paper

Date Written: 2017

Abstract

The working of the digital economy is intimately intertwined with the mechanics of algorithms. Powerful computers and 'smart' devices carry out the step-bystep sets of operations contained in algorithms in order to perform the calculation, data processing, and automated reasoning tasks that assist firms and consumers in their daily economic decisions. Increasingly, firms use the outcome of data analytics and mining to support core activities, such as improving internal monitoring, enhancing marketing strategies, cutting processing costs, and determining sale prices. On their part, consumers have been embracing algorithm-based services such as search engines (e.g., Google and Bing), marketplaces (e.g., eBay and Amazon Marketplace), rating services (e.g., Tripadvisor and Yelp) and recommender systems (e.g., Deezer and Spotify) in order to navigate the web and make their purchase decisions, both online and offline. Current developments in technologies such as artificial intelligence and the Internet of Things (IOT), combined with Gargantuan strides in computing storage and processing power, are likely to intensify these trends. For instance, habitual objects in consumers’ homes such as fridges and toasters, once morphed into devices able to collect and process data, and to communicate with other devices and systems, allow consumers to enter into contracts for the sale of goods without logging on to a supplier’s website or using other Internet-based or mobile services. In these still fantastical sounding scenarios, IOT devices and personal digital assistants fed by artificial intelligence are deployed to make purchases and other decisions on the consumer’s behalf by directly communicating with other systems through the internet and, possibly, with decreasing amounts of human involvement. It is indeed plausible that the more reliable and trustworthy the algorithms become, and their comparative advantage over decisions taken by humans grows, the stronger the incentives that consumers (and firms) have to allow for increasingly automated decision making. Sergey Brin, Google’s co-founder, recently envisaged a possible future in which automation will alleviate “some of the more mundane tasks”, allowing people to “find more and more creative and meaningful ways to spend their time.”

Suggested Citation

Vezzoso, Simonetta, Competition by Design (2017). Faculty of Law, Stockholm University Research Paper No. 39, Available at SSRN: https://ssrn.com/abstract=3075199 or http://dx.doi.org/10.2139/ssrn.3075199

Simonetta Vezzoso (Contact Author)

University of Trento ( email )

Via Giuseppe Verdi 26
Trento, Trento 38152
Italy

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