Policy paper TILEC

Advances in the collection, processing, and analysis of data are reshaping society. A key consequence of this development has been the emergence of so-called data-driven markets. In earlier work, TILEC member Jens Prüfer and TILEC extramural fellow Christoph Schottmüller (University of Cologne) analyzed competition on data-driven markets and showed a strong tendency towards market tipping and thus monopolization.

Market tipping leads to lower innovation incentives of both the challengers and the dominant firm in these markets. Based on the analysis, they made a policy proposal, consisting in mandatory data sharing between competitors, and showed that this can avoid market tipping. The Friedrich-Ebert-Stiftung, a foundation close to Germany’s Socialdemocratic Party, later asked Jens "to develop some recommendations on how the idea can be implemented in legislative practice."

Outcome

The outcome is a slim 15-page TILEC Policy Paper titled "Competition Policy and Data Sharing on Data-driven Markets: Steps Towards Legal Implementation," which tries to give (preliminary) answers to several key questions, including:

1. How to identify a data-driven market empirically?
2. What information should be shared on which market?
3. How can user information be anonymized and how can re-identification of individuals (technically or legally) be avoided?
4. Who should share data?
5. Who should have the right to get access to the shared data? At what price?
6. How should data sharing be organized? What is the optimal governance structure?

To provide more rigorous underpinnings to the ideas developed in the paper, Jens will team up with other TILEC researchers (combining expertise in economics, law, econometrics, data science, and consumer research) as part of a project tackling these questions that was commissioned by the German Finance Ministry.