Output
The project has provided new knowledge on four themes, one methodological, two related to the virtual and the physical layers of Internet and one on policy.
• Background theory, two-sided markets, network dynamics, contractual externalities: This part develop new theory and models to study issues of externalities between participants to the digital economy. The research has focused on the role of consumers’ information in two-sided markets, where each side must anticipate other sides' behaviour, as well as on the incentives for a multi-product firm to move from a one-sided platform structure to a multi-sided platform structure. The role of consumers' beliefs in shaping competition between platforms is also explored. The most recent developments focus on the dynamics of competition with network externalities. One paper develops a new theory explaining when and why a firm may decide to develop as a two-sided platform by hosting rival products.
• Virtual layer, recommendation systems, privacy, transaction costs: This part is concerned with the behaviour of firms and consumers online, in the production, exchange and treatment of information. A first part of the project was concerned with recommendation systems and online feedback systems. A second part has focused on the economics of privacy, with several contributions analysing firm’s incentives to protect personal data and the impact of privacy regulation. Another line of research has been concerned with the implications of search friction in online markets.
• Physical layer, pricing, investment: This part is mostly concerned with the telecom infrastructure and link between virtual and brick-and-mortar activities. After an inquiry on the issue of net-neutrality, the research has evolved toward the analysis of the effect of mergers on adoption of new technologies, investment and innovation in infrastructure. Another work reconsiders vertical relationships and optimal distribution modes when fine information allows price-personalization at the retail level.
• Competition policy for two-sided markets: The research addressed several competition issues in the context of platforms and two-sided markets. This includes for instance work on collusion between platforms and work on anti-competitive tying by two-sided platforms. Special attention has been devoted to mergers which include contributions on mergers in two-sided markets, mergers in innovative sectors and mergers between multi-product firms.
Recently the team has been interested by the impact of artificial intelligence on firms’ behaviour and competition (personalization, targeted advertising, algorithmic pricing...). In particular it started to investigate empirically and theoretically the issue of tacit collusion by autonomous pricing algorithms
Dissemination
Many publications have been achieved in top economic journals. The work has been presented in many conferences, with participation of researchers but also of policy makers and stakeholders.
The expertise developed has induced members of the team to contribute to the public debate through many roundtables and several reports. This includes 3 reports to the European Commission (with participation of J. Crémer, D.S. Jeon, Y. Lefouili and L. Madio) and a report for the Stigler Center of Chicago Booth (participation of B. Jullien).
A large part of the research output is synthetized in the forthcoming chapter of volume 4 of the Handbook of Industrial Organization (“Two-Sided Markets, Pricing and Network Externalities”). The team has also contributed to several policy papers (on merger and innovation, competition policy for two-sided market, platform liability, algorithmic pricing)
The ERC has also contributed to finance two regular conferences. The Digital Economic Conference is an annual conference gathering scholars, business actors and policy makers. The ERC grant was also used to launch a more specialized annual workshop on The Economics of Platforms, that now continues alternative funding
