Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/282351 
Year of Publication: 
2023
Series/Report no.: 
CESifo Working Paper No. 10663
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
Digital platforms, empowered by artificial intelligence algorithms, facilitate efficient interactions between consumers and merchants that allow the collection of profiling information which drives innovation and welfare. Private incentives, however, lead to information asymmetries resulting in market failures. This paper develops a product differentiation model of competition between two platforms to study private and social incentives to share information. Sharing information can be welfare-enhancing because it solves the data bottleneck market failure. Our findings imply that there is scope for the introduction of a mandatory information sharing mechanism from big platforms to their competitors that help the latter improve their network value proposition and become more competitive in the market. The price of information in this sharing mechanism matters. We show that price regulation over information sharing like the one applied in the EU jurisdiction increases the incentives of big platforms to collect and analyze more data. It has ambiguous effects on their competitors that depend on the exact relationship between information and network value.
Subjects: 
information sharing
digital platforms
data bottleneck
data portability
JEL: 
D47
D82
K21
L21
L22
L40
L41
L43
L51
L86
Document Type: 
Working Paper
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