 Digital monopolies: Privacy protection or price regulation?Simon Loertscher and Leslie M. Marx International Journal of Industrial Organization, 2020, vol. 71, issue C Abstract: Increasing returns to scale in data gathering and processing give rise to a new form of monopoly, referred to here as digital monopoly. Digital monopolies create new challenges for regulators and antitrust authorities. We address two in this paper: market power arising from improved match values and from reduced privacy. The digital monopoly’s profit and social surplus always increase as privacy decreases. However, consumer surplus is non-monotone in privacy. Without privacy, the match value is perfect but completely extracted by the digital monopoly. In contrast, as privacy goes to infinity, match values and social surplus go to zero. With regulated prices, consumer surplus is maximized without privacy protection. As with natural monopolies, price regulation thus remains an appropriate tool in the digital age to capture the social benefits from increasing returns to scale without harming consumers. Keywords: Natural monopoly; Privacy concerns; Big data; Transparency; Ramsey pricing (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:71:y:2020:i:c:s0167718720300461 DOI: 10.1016/j.ijindorg.2020.102623 Access Statistics for this article International Journal of Industrial Organization is currently edited by P. Bajari, B. Caillaud and N. Gandal More articles in International Journal of Industrial Organization from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.