Data, Competition, and Digital Platforms

Dirk Bergemann and Alessandro Bonatti

No 2343, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: We propose a model of intermediated digital markets where data and heterogeneity in tastes and products are defining features. A monopolist platform uses superior data to match consumers and multiproduct advertisers. Consumers have heterogenous preferences for the advertisers' product lines and shop on- or off-platform. The platform monetizes its data by selling targeted advertising space that allows advertisers to tailor their products to each consumer's preferences. We derive the equilibrium product lines and advertising prices. We identify search costs and informational advantages as two sources of the platform's bargaining power. We show that privacy-enhancing data-governance rules, such as those corresponding to federated learning, can lead to welfare gains for the consumers.

Keywords: Data; Privacy; Data Governance; Digital Advertising; Competition; Digital Platforms; Digital Intermediaries; Personal Data; Matching; Price Discrimination (search for similar items in EconPapers)
JEL-codes: D18 D44 D82 D83 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2022-08
New Economics Papers: this item is included in nep-com, nep-des, nep-mic, nep-pay and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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https://cowles.yale.edu/sites/default/files/2022-11/d2343.pdf (application/pdf)

Related works:
Journal Article: Data, Competition, and Digital Platforms (2024)
Working Paper: Data, Competition, and Digital Platforms (2023)
Working Paper: Data, Competition, and Digital Platforms (2023)
Working Paper: Data, Competition, and Digital Platforms (2022)
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