Data and Markups: A Macro-Finance Perspective

Abstract

What does market power look like in a data economy? Economists typically use markups to measure market power. However, we use a simple model to show how firms’ growing stocks of data can change markups, without changing their power to affect prices. Data’s effects depend on how markups are aggregated. Growing data can produce differences in markup measures that match empirical facts. Markup aggregation wedges can measure data stocks and offer a way to purge markups of data’s effects to reveal market power.