Universität zu Köln

Prüfer, Jens and Schottmüller, Christoph ORCID: 0000-0001-6059-1090 (2021). Competing with Big Data*. J. Indust. Econ., 69 (4). S. 967 - 1009. HOBOKEN: WILEY. ISSN 1467-6451

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Abstract

We study competition in data-driven markets, where the cost of quality production decreases in the amount of machine-generated data about user preferences or characteristics. This gives rise to data-driven indirect network effects. We construct a dynamic model of R&D competition, where duopolists repeatedly determine innovation investments. Such markets tip under very mild conditions, moving towards monopoly. After tipping, innovation incentives both for the dominant firm and the competitor are small. We show when a dominant firm can leverage its dominance to a connected market, thereby initiating a domino effect. Market tipping can be avoided if competitors share their user information.

Item Type:	Journal Article
Creators:	Creators Email ORCID ORCID Put Code Prüfer, Jens UNSPECIFIED UNSPECIFIED UNSPECIFIED Schottmüller, Christoph UNSPECIFIED orcid.org/0000-0001-6059-1090 UNSPECIFIED
URN:	urn:nbn:de:hbz:38-572869
DOI:	10.1111/joie.12259
Journal or Publication Title:	J. Indust. Econ.
Volume:	69
Number:	4
Page Range:	S. 967 - 1009
Date:	2021
Publisher:	WILEY
Place of Publication:	HOBOKEN
ISSN:	1467-6451
Language:	English
Faculty:	Faculty of Management, Economy and Social Sciences
Divisions:	Center of Excellence C-SEB Faculty of Management, Economics and Social Sciences > Economics > Microeconomics, Institutions and markets > Professorship for Microeconomics
Subjects:	Economics
Uncontrolled Keywords:	Keywords Language LEARNING-CURVE; MARKET; DOMINANCE Multiple languages Business, Finance; Economics Multiple languages
Refereed:	Yes
URI:	http://kups.ub.uni-koeln.de/id/eprint/57286