Information Sharing Enforcement: Does It Come to Fruition in the Marketplace?
Posted: 20 Oct 2020
Date Written: August 13, 2020
Online retailers are aggressively expanding own-brand businesses, directly competing with sellers settling in their online marketplaces. Regulators show great concern of how the giant retailer allegedly is quashing its smaller rivals and unveil plans to oblige it to share data with the rivals. The data considered in this enforcement is essential for demand estimation, of which the small sellers often suffer from a lack. In this paper, we investigate the data-sharing legislation from a policy maker's standpoint. This study shows whether and when the data-sharing enforcement is effective, to help small sellers and alleviate antitrust issues. In our model, a retailer sells its own-brand product in its online marketplace, where a seller competes with the retailer's product. We consider data sharing that can be enforced by the regulator (i.e., sharing enforcement) if the enforcement improves the total profit of the participants or the seller's profit in the marketplace. Surprisingly, sharing-enforcement is not always the best decision. We find that the decision hinges on the value of the shared information and how the seller perceives it. A ban on sharing, rather than sharing, should be enforced if the retailer's information is not of high quality and the seller thinks too highly of its value. We urge the regulators to monitor the quality of information and to provide in-depth education to cultivate the seller's expertise; otherwise, sharing-enforcement never carries out the regulator's mission. Furthermore, we confirm that the intervention for sharing is not valid in many circumstances; rather, we suggest it would be better to encourage, with no intervention, for the seller and the retailer to come to a mutual agreement for their own profit gain (i.e., sharing agreement). Our results provide the requisites for the successful intervention of the regulators and conditions for the effective data-sharing for the marketplace participants.
Keywords: Antitrust Regulation, Information Sharing, Information Asymmetry, Online Marketplace
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