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B05: Platform markets

Digital platforms such as Amazon, Apple, Facebook und Google attract considerable attention from competition authorities and the general public. In this project, we investigate how business models, limited information, and learning by market participants affect outcomes and social welfare in platform markets. We develop theoretical models and provide both economic and legal analysis to guide legislatures, courts, and regulatory authorities.

 

Project members

 

Discussion papers (B05)

 

Motivation

Both nascent and successful established firms operating in the internet world function as platforms - e.g., Amazon, Airbnb, Apple, Booking, Facebook, Google Search, Tinder, and Uber. Gatekeepers with a profound impact on daily life. Novel market environments and business models. The recent literature on the economics of platforms can be applied and further developed to analyze markets in which platforms operate.

Policy relevance

Competition authorities are investigating certain contracting behavior by platforms (e.g., price-parity clauses). Competition authorities are wondering how to deal with merger cases when platforms are part of the picture. Sector-specific regulation may need an update in light of technological developments and the emergence of new players outside the traditional regulated domain (e.g., over-the-top players in communication services, aggregators for media content). Privacy as an important consumer protection issue plays out prominently in the case of digital platforms.

Project Plan

Work package 1 - Positive theories of platform markets

  • In many markets, platforms and other businesses coexist having opted for different business and revenue models.
  • We endogenize the choice of business and revenue model.
  • We investigate the role of seller competition and congestion on a platform and their effect on market outcomes and market structure.
  • Platform operate in a dynamic market environment, which requires further investigation as to the different players’ learning and believe formation.
  • We study innovation incentives by platforms and service providers who interact with consumers through platforms.

Work package 2 - Competition and consumer protection policy in platform markets

  • Competition and consumer protection policy issues are emerging in many facets of platform markets. We analyze and evaluate how competition authorities and courts take into account the economic peculiarities of platform markets and how the present legal framework should be interpreted in concrete cases (for example, regarding price-parity clauses).
  • We address the extent to which the current legal framework is apt to do justice to the characteristics of platform markets and which amendments should be recommended.
  • In particular, we address the redesign the merger control regime in platform markets in line with the overall objectives of competition policy.
  • We analyze the implications of end-user privacy policies and consumer behavior in digital markets on competition between platforms and explore the link between privacy policies and general competition policy objectives.

Work package 3 - Media platforms

  • Insights from the literature on two-sided platforms are useful in understanding some aspects of media markets. Additional factors should be taken into account.
  • First, the fact that some consumers use multiple media outlets requires further investigation. We go beyond symmetric duopoly models.
  • Second, we propose and analyze novel models consumer behavior in which we do not assume that consumers “eat" all ads and act in their own best interest.
  • Third, we take a closer look at content provision and the effects of policy interventions on content provision and content consumption, especially in light of the digitalization and convergence of media.
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