Regulating Digital Platform Monopolies: The Case of Facebook

53 Pages Posted: 29 Jun 2020 Last revised: 1 Nov 2023

See all articles by Seth Benzell

Seth Benzell

Chapman University - The George L. Argyros School of Business & Economics; MIT Initiative on the Digital Economy; Stanford University, Human-Centered Artificial Intelligence Digital Economy Lab

Avinash Collis

Carnegie Mellon University

Date Written: February 22, 2022

Abstract

We construct and analyze a general model of digital platforms, determining conditions under which government interventions raise welfare. We calibrate our model using stated choice experiments on over 57,000 US Internet users. Facebook creates $14 billion in surplus per month, concentrated among female and older users. We simulate six proposed policy interventions. We find a 3% tax on Facebook's ad-revenue raises welfare by 1.1%, by shifting Meta's incentives towards maintaining a larger platform. Achieving perfect competition, while preserving network effects, would raise surplus from Facebook by 4.8%. A "data-dividend" rebate of profits to users would increase surplus by 30.3%.

Keywords: Multi-Sided Platforms, Network Effects, Taxation, Regulation, Social Media, Facebook

Suggested Citation

Benzell, Seth and Collis, Avinash, Regulating Digital Platform Monopolies: The Case of Facebook (February 22, 2022). Available at SSRN: https://ssrn.com/abstract=3619535 or http://dx.doi.org/10.2139/ssrn.3619535

Seth Benzell (Contact Author)

Chapman University - The George L. Argyros School of Business & Economics ( email )

1 University Drive
Orange, CA 92866
United States

MIT Initiative on the Digital Economy ( email )

245 First Street
Cambridge, MA 02142
United States

Stanford University, Human-Centered Artificial Intelligence Digital Economy Lab ( email )

Stanford, CA 94305
United States

Avinash Collis

Carnegie Mellon University ( email )

Pittsburgh, PA
United States

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