The digital economy is of growing importance for society, but its development challenges the traditional approaches to competition policy and regulation, based on a benchmark of perfect competition that regulatory authorities aim at approaching in relevant markets. In the digital era, economies of scale and scope are more the rule than the exception, network effects and multi-sidedness are pervasive, information and data are shaping industries, the boundaries of relevant markets are becoming blurred, and industry dynamics are on a new scale. These features make the perfect competition benchmark and the focus on individual markets less relevant, calling for a new conceptual framework for the analysis of competition in the digital economy.
The proposed research aims at breaking new ground in this area, so as to shed light for competition policy and regulation. Three related themes are addressed.
From markets to ecosystems. Competition policy traditionally relies on relevant markets, identified through demand- or supply-side substitutability. Yet, in practice, consumers look for a broad range of goods, and their purchasing patterns (e.g. one-stop shopping or single-homing versus multi-stop shopping or multi-homing) are partly driven by transaction costs (e.g. informational frictions). This is particularly so in the digital era, where Internet users look for a broad range of services (communication, search, social interaction, news, streaming, online shopping, gig services, …). This, in turn, induces platforms to develop ecosystems, giving rise to complex patterns of complementarity and substitutability and raising key coordination issues for innovation and development.
Competition for attention. A key feature of online markets is that different types of digital services compete for consumers’ attention. Accounting for consumers’ limited attention can thus help understanding competition, within platforms as well as across platforms. This, however, requires an appropriate modelling of consumer attention, accounting for behavioural biases, network effects and inertia, and of that practices that can be used to steer consumer attention within a platform.
The organization of vertical chains. The digital revolution has sometimes redefined the allocation of tasks within vertical chains. For example, Amazon not only acts as a reseller as well as an agent for third-party sellers; it is moreover vertically integrated in the case of private labels. As a result, platforms are now both competing and cooperating with their partners. These new forms of coopetition call for a better understanding of “who does what” in digital markets.
