Fintech Thrust Seminar | Antitrust, Regulation, and User Union in the Era of Digital Platforms and Big Data

Antitrust, Regulation, and User Union in the Era of Digital Platforms and Big Data

Abstract: Firms' production function in the digital era entails customers' network adoption and data contribution. We model platform competition with endogenous pricing, user heterogeneity, network effects, infrastructure investment, and data collection and sharing, thereby providing a unifying framework to evaluate data-related regulation and antitrust policies. Data feedback, potentially interacting with network effects, improves service quality but may concentrate market power. Platforms strategically underprice initially but subsequently overcharge users, and can ``collude'' through data sharing.  Meanwhile, because users are dispersed, they do not internalize the impact of their actions (e.g., data contribution and sharing) on (i) future service or product quality which affects all users, (ii) concentration of market power, and (iii) platforms’ incentives to innovate and invest in data infrastructure. We show that data sharing proposals (e.g., open banking and data vendor), user privacy protections (e.g., GDPR and CCPA), platform commitments (e.g., to future prices) fail to address inefficiencies in data-driven competition and platforms' ex-ante investment for data production. We propose and model user union as an effective solution for consumer protection: a representative governing body coordinates users' contribution to the platforms and maximizes user surplus.