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Data‐enabled learning, network effects, and competitive advantage

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  • Andrei Hagiu
  • Julian Wright

Abstract

We model dynamic competition between firms which improve their products through learning from customer data, either by pooling different customers' data (across‐user learning) or by learning from repeated usage of the same customers (within‐user learning). We show how a firm's competitive advantage is affected by the shape of firms' learning functions, asymmetries between their learning functions, the extent of data accumulation, and customer beliefs. We also explore how public policies toward data sharing, user privacy, and killer data acquisitions affect competitive dynamics and efficiency. Finally, we show conditions under which a consumer coordination problem arises endogenously from data‐enabled learning.

Suggested Citation

  • Andrei Hagiu & Julian Wright, 2023. "Data‐enabled learning, network effects, and competitive advantage," RAND Journal of Economics, RAND Corporation, vol. 54(4), pages 638-667, December.
  • Handle: RePEc:bla:randje:v:54:y:2023:i:4:p:638-667
    DOI: 10.1111/1756-2171.12453
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    References listed on IDEAS

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