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Information services: competition and externalities

Project description

Insight into the economics of information services

The recent growth in information services has also led to an increase in externalities between economic agents. Information on digital platforms, search engines, and communication networks can be seen as public goods, the production and exchange of which between two parties may benefit or harm other parties. The ERC-funded ISECO project aims to comprehensively explore the economic nature of information services at both a virtual and physical level, with a key focus on externalities. Research objectives include establishing a relevant theory on the dynamics of two-sided markets, investigating issues of design, privacy rights, and transaction fees, analysing pricing, developing dynamic investment models, as well as creating tools for competition policymakers.

Objective

This application aims at fostering our knowledge of the economics of information services by studying the strategic interactions between agents involved in the production and exchange of information services. In this context, externalities play a key role explored by this proposal. Their increasing prevalence in information services can be traced to three features:
- Many information services involve one-sided or two-sided network externalities.
- Information is a public good and the production and exchange of information between two parties may affect other parties in a positive or negative manner.
- Information services and physical infrastructures are complements.
Externalities arise in the two layers of the information society, the content level and the physical infrastructure. The proposal is then organized around four parts:
1. Background theory: two-sided markets, network dynamics, contractual externalities
2. Virtual layer: recommendation systems, privacy, transaction costs
3. Physical layer: pricing , investment
4. Competition policy for two-sided markets

The first part consists of the development of relevant theory with original and novel methods including for instance global games, coordination games and recent contract theory. The second part studies specific issues in information services such as the design of search engines and the right to privacy. It also includes empirical investigation of on-line transaction costs using proprietary data of transactions on e-commerce platforms. The third part is concerned with the infrastructure. It studies net-neutrality and the prices of data from the perspective of price theory, accounting for the gratuity of some services. It will also develop original dynamic investment models to understand the role of the complementarity between infrastructure and service innovation and the role of legacy. The last part will develop tools for competition policy makers.

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Coordinator

FONDATION JEAN JACQUES LAFFONT,TOULOUSE SCIENCES ECONOMIQUES
Net EU contribution
€ 1 815 938,00
Address
5e etage, 1 esp de l'universite
31080 Toulouse
France

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Region
Occitanie Midi-Pyrénées Haute-Garonne
Activity type
Research Organisations
Links
Other funding
€ 0,00

Beneficiaries (2)