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Search, Data, and Market Power

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  • Carl-Christian Groh

Abstract

I study the relationship between data and market power in a duopoly model of price discrimination with search frictions. One firm receives a signal about the valuation of any arriving consumer while its rival receives no information. A share of consumers, referred to as searchers, have equal valuation for the good of either firm and optimally choose which firms to visit. The remaining consumers are captive. In equilibrium, a large majority of searchers will only visit the firm with data. The market share of the firm with data converges to one as the share of searchers in the market goes to one, regardless of the signal structure. Reductions of search frictions induce higher market concentration. The establishment of a right to data portability can address the competitive imbalances caused by data advantages.

Suggested Citation

  • Carl-Christian Groh, 2022. "Search, Data, and Market Power," CRC TR 224 Discussion Paper Series crctr224_2022_383, University of Bonn and University of Mannheim, Germany.
    • Handle: RePEc:bon:boncrc:crctr224_2022_383
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    File URL: https://www.crctr224.de/research/discussion-papers/archive/dp383
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    More about this item

    Keywords

    search; information exchange; antitrust; price discrimination approach; German Competition Act; 19a designations; competition law;
    All these keywords.

    JEL classification:

    • D18 - Microeconomics - - Household Behavior - - - Consumer Protection
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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