Project description
A closer look at online marketplaces
Online marketplaces connect sellers and consumers. They are very popular. In fact, about half of all ecommerce sales today are made through online marketplaces. But some of the very large platforms have been criticised for abusing their monopoly power vis-a-vis their users (consumers, sellers, advertisers) and engaging in anti-competitive practices. The ERC-funded FAPoD project will explore the dual role of online marketplaces (marketplace and seller). It will also investigate how platforms steer consumers to sellers. The nature of recommendation algorithms, particularly the interplay between consumer search and algorithm effectiveness, will also be studied. The findings will shed light on the antitrust remedies for the digital marketplace.
Objective
Internet markets tend to concentrate in the hands of a very few large platforms. These platforms have been accused of abusing their monopoly power vis-a-vis their users (consumers, sellers, advertisers) and maintaining the latter through hostile behavior towards potential competitors. They are said to harm users by ‘self-preferencing’, data harvesting, creating 'monopoly positions' and extracting resulting rents with high fees, all the while avoiding competition by acquiring, copying and otherwise disadvantaging potential competitors. This proposal addresses these concerns in four parts. Part 1 focuses on the dual role of online marketplaces, whereby the platform both runs the marketplace and acts as a seller on it. I aim to understand how such hybrid marketplaces conduct themselves toward consumers and third party sellers. The model will be used to evaluate recent policy proposals and suggest ways to avoid significant unintended consequences. Part 2 studies how platforms steer consumers to sellers. As most platforms let sellers set prices and collect fees on revenues, a platform’s own algorithm and her choice to augment/replace it with a position auction may be consequently driven by revenue maximization. I plan to show that steering systems may drastically alter pricing, leading to ‘mediated’ competition. Part 3 explores the nature of recommendation algorithms, particularly the interplay between consumer search and algorithm effectiveness. I demonstrate that algorithms may be self-fulfilling and self-defeating, which determines their effectiveness and significantly alters the resulting allocations and their efficiency. Part 4 explains the circumstances in which an incumbent platform may acquire an upstart platform. These depend on, the overlap of existing user bases, increasing returns to data and monopoly power over advertisers. Acquisitions may be used in situations of both no and substantial overlap in user bases, with mixed welfare consequences.
Keywords
Project’s keywords as indicated by the project coordinator. Not to be confused with the EuroSciVoc taxonomy (Fields of science)
Project’s keywords as indicated by the project coordinator. Not to be confused with the EuroSciVoc taxonomy (Fields of science)
Programme(s)
Multi-annual funding programmes that define the EU’s priorities for research and innovation.
Multi-annual funding programmes that define the EU’s priorities for research and innovation.
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HORIZON.1.1 - European Research Council (ERC)
MAIN PROGRAMME
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Topic(s)
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Calls for proposals are divided into topics. A topic defines a specific subject or area for which applicants can submit proposals. The description of a topic comprises its specific scope and the expected impact of the funded project.
Funding Scheme
Funding scheme (or “Type of Action”) inside a programme with common features. It specifies: the scope of what is funded; the reimbursement rate; specific evaluation criteria to qualify for funding; and the use of simplified forms of costs like lump sums.
Funding scheme (or “Type of Action”) inside a programme with common features. It specifies: the scope of what is funded; the reimbursement rate; specific evaluation criteria to qualify for funding; and the use of simplified forms of costs like lump sums.
HORIZON-ERC - HORIZON ERC Grants
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Call for proposal
Procedure for inviting applicants to submit project proposals, with the aim of receiving EU funding.
Procedure for inviting applicants to submit project proposals, with the aim of receiving EU funding.
(opens in new window) ERC-2021-COG
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08002 Barcelona
Spain
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