Digital Platforms and Antitrust

27 Pages Posted: 17 Jun 2020

See all articles by Geoffrey Parker

Geoffrey Parker

Dartmouth College

Georgios Petropoulos

Massachusetts Institute of Technology (MIT); Bruegel

Marshall W. Van Alstyne

Boston University – Questrom School of Business; Massachusetts Institute of Technology (MIT) - Sloan School

Date Written: May 22, 2020

Abstract

Digital platforms are at the heart of online economic activity, connecting multi-sided markets of producers and consumers of various goods and services. Their market power, in combination with their privileged ecosystem position, raises concerns that they may engage in anti-competitive practices that reduce innovation and consumer welfare. This paper deals with the role of market competition and regulation in addressing these concerns. Traditional (ex-post) antitrust intervention will be less effective in markets driven by network effects unless it is combined with a proper (ex-ante) regulatory framework. Antitrust tools should focus on value creation and its distribution before focusing on competition. The scope of regulatory intervention should satisfy the following three criteria: i) value creation from operation of the platforms does not decrease due to the policy intervention; in particular, interventions should not reduce network effects; ii) allocative efficiency is based on distributing the value created in a fair way among market participants e.g. use of the Shapley Value. Fair and transparent rules must govern the platform ecosystem; iii) dynamic efficiency and competition ensure that incentives for market misconduct and anticompetitive strategies such as artificial entry barriers are eliminated. Market interventions that target a firm’s market power should ideally retain value creation while also encouraging small firm entry and innovation. Data has a central role in online markets. Value creation is reinforced through a recursive a data capture and data deployment feedback loop which is enabled by machine learning technologies. A regulatory intervention that facilitates data sharing mechanisms, such that data will not only confer value to market leaders but also to their competitors to the benefit of consumers, is crucial for creating more competitive and innovative digital markets.

Keywords: Antitrust, Regulation, Digital platforms, Data sharing

JEL Classification: K21, L40, L41, L43, L51, L86

Suggested Citation

Parker, Geoffrey and Petropoulos, Georgios and Van Alstyne, Marshall W., Digital Platforms and Antitrust (May 22, 2020). Available at SSRN: https://ssrn.com/abstract=3608397 or http://dx.doi.org/10.2139/ssrn.3608397

Geoffrey Parker

Dartmouth College ( email )

Department of Sociology
Hanover, NH 03755
United States
603-646-9075 (Phone)

HOME PAGE: http://engineering.dartmouth.edu/people/faculty/geoffrey-parker

Georgios Petropoulos (Contact Author)

Massachusetts Institute of Technology (MIT) ( email )

77 Massachusetts Avenue
50 Memorial Drive
Cambridge, MA 02139-4307
United States

Bruegel ( email )

Rue de la Charité 33
B-1210 Brussels Belgium, 1210
Belgium
22274217 (Phone)
22274217 (Fax)

Marshall W. Van Alstyne

Boston University – Questrom School of Business ( email )

595 Commonwealth Avenue
Boston, MA 02215
United States
617-358-3571 (Phone)

HOME PAGE: http://questromapps.bu.edu/mgmt_new/Profiles/VanAlstyneMarshall.html

Massachusetts Institute of Technology (MIT) - Sloan School ( email )

Initiative on the Digital Economy
245 First St, Room E94-1521
Cambridge, MA 02142
United States
617-253-0768 (Phone)

HOME PAGE: http://web.mit.edu/marshall/www/home.html

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