Insider Imitation

57 Pages Posted: 5 May 2021 Last revised: 12 Jan 2022

See all articles by Erik Madsen

Erik Madsen

New York University

Nikhil Vellodi

Paris School of Economics (PSE)

Date Written: January 11, 2022


Vertically-integrated marketplaces commonly use data on the sales of third-party products to decide which private-label products to introduce. We develop a model to evaluate the competitive implications of this practice when third-party innovation is sensitive to private-label competition. We find that a ban on data usage stimulates innovation for "experimental'' product categories with significant upside demand potential, but stifles it otherwise. "Data patents'', which restrict data usage for a limited time, improve on a ban and can stimulate innovation across a wide variety of settings. Our results contribute to an ongoing policy discussion regarding data usage by dominant online platforms.

Keywords: Innovation, online platforms, data regulation, long-tail products

JEL Classification: D42, D82, L42

Suggested Citation

Madsen, Erik and Vellodi, Nikhil, Insider Imitation (January 11, 2022). Available at SSRN: or

Erik Madsen

New York University ( email )

19 West 4th Street
New York, NY 10012
United States

Nikhil Vellodi (Contact Author)

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014

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