B05: Platform markets

The business practices of large digital platforms such as Google, Amazon, Facebook, Apple and Microsoft (GAFAM) shape economic and social interactions. Some of these practices have recently been criticized by policy-makers. These developments were preceded by a literature in economics which, in particular, sheds light on the allocations that obtain in such markets.

Loosely speaking, platforms can be characterized as providing intermediation services to users who experience network benefits. Platforms have various price and non-price instruments at their disposal to manage these network effects. The use of such instruments defines the business model of the platform; e.g., a platform may be purely advertising-funded or purely subscription-funded.

In this project, we make fundamental and policy-oriented contributions to the growing literature that addresses the link between individual behavior and incentives in such markets. In particular, we analyze how platform business models, limited information, and learning by participants and platforms affect market outcomes and social welfare.

Business strategies and their long-term implications are a core concern for competition authorities when assessing, for example, the likely effects of a merger between two platforms or a particular business practice such as exclusivity. The general questions in this context continue to be: How does platform business strategy shape market outcomes? How should competition authorities and courts take into account the economic peculiarities of platform markets?

A prominent group of platforms collect data and monetize user attention through advertising. This includes classic ad-financed media as well as social networks. We evaluate the impact of business strategy, market characteristics, and possible policy interventions on outcomes, including the production and consumption of media content and advertising.