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Policy Impact of “Competing with Big Data”

One year ago, Christoph Schottmüller and I put out “Competing with Big Data,” a theory-paper offering a definition and analysis of “data-driven markets”—and a policy proposal to overcome the main problem, market tipping. Based on the idea of an earlier paper (Argenton and Prüfer, 2012), we studied the consequences of a (currently fictive) regulatory requirement for dominant firms in data-driven markets (think of search engines, many digital platform markets, self-driving cars, etc.) to share their data on user preferences and characteristics with each other. We showed that such a policy intervention can mitigate the strong tendency of data-driven markets towards monopolization and that in most relevant cases the net welfare effects would be highly positive.

Since then, this paper—and especially the policy proposal—has been discussed widely both in academic and in policy circles. In January 2018, the Secretary General of the Dutch Ministry of Economic Affairs adopted our view on data sharing (Camps, 2018, p.3):

“one can think of data used for search engine optimisation, such as users’ clickstream following certain search queries. By increasing access to such anonymised clickstream data, other parties in different markets can use them for further innovation. At the same time, a strong concentration of large internet companies on these markets can be avoided (Prüfer and Schottmüller, 2017). One can think of the markets for digital maps, retail and, in the future, autonomous cars.”

Similarly, in his latest book, Viktor Mayer-Schönberger, who co-authored a highly successful book on the economic and social consequences of big data, attributes :

“Rather than algorithmic transparency, regulators wanting to ensure competitive markets should mandate the sharing of data. To this end, economists Jens Prüfer and Christoph Schottmüller offer an intriguing idea.  They suggest that large players using feedback data must share such data (stripped of obvious personal identifiers, and stringently ensuring that privacy is not being unduly compromised) with their competitors. Calculating the effect of such mandated data sharing over a wide spectrum of scenarios, they see an overall net benefit in most cases, especially when one incumbent is close to dominating a market. Building on this idea, we suggest what we term a progressive data-sharing mandate.” (Mayer-Schönberger and Ramge, 2018, p.167)

So, for now we keep the watch from the ivory tower and view to which extent these influential multiplicators may help policy implementation. And we are thinking about an empirical validation of several data-driven sectors …