Work

Insider Imitation

Year: 2024

Type: article

Abstract: We study how regulating data usage impacts innovation in digital markets. Platforms commonly use proprietary data about third-party sellers to inform their own competing offerings, dampening incentives for innovation. We model this interaction and characterize how data usage restrictions reshape these incentives. An outright ban on data usage may boost or curtail innovation, depending on the thickness of the right tail of demand for new products. More flexible rules controlling when and what data are made available can always improve the effectiveness of regulation. Our results contribute to an ongoing policy discussion regarding competition in digital markets.

Source: Journal of Political Economy

DOI: 10.1086/732888

Authors: Erik Madsen, Nikhil Vellodi

Institutions: New York University, Paris School of Economics

Language: English

Topic: Digital Platforms and Economics

Subfield: Strategy and Management

Field: Business, Management and Accounting

Domain: Social Sciences

SDGs: Industry, innovation and infrastructure, Peace, justice, and strong institutions

Open Access status: green

Funder: Agence Nationale de la Recherche