Virtual Competition: The Promise and Perils of the Algorithm-Driven Economy

Virtual Competition: The Promise and Perils of the Algorithm-Driven Economy

by Ariel Ezrachi, Maurice E. Stucke


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Shoppers with Internet access and a bargain-hunting impulse can find a universe of products at their fingertips. In this thought-provoking exposé, Ariel Ezrachi and Maurice Stucke invite us to take a harder look at today’s app-assisted paradise of digital shopping. While consumers reap many benefits from online purchasing, the sophisticated algorithms and data-crunching that make browsing so convenient are also changing the nature of market competition, and not always for the better.

Computers colluding is one danger. Although long-standing laws prevent companies from fixing prices, data-driven algorithms can now quickly monitor competitors’ prices and adjust their own prices accordingly. So what is seemingly beneficial—increased price transparency—ironically can end up harming consumers. A second danger is behavioral discrimination. Here, companies track and profile consumers to get them to buy goods at the highest price they are willing to pay. The rise of super-platforms and their “frenemy” relationship with independent app developers raises a third danger. By controlling key platforms (such as the operating system of smartphones), data-driven monopolies dictate the flow of personal data and determine who gets to exploit potential buyers.

Virtual Competition raises timely questions. To what extent does the “invisible hand” still hold sway? In markets continually manipulated by bots and algorithms, is competitive pricing an illusion? Can our current laws protect consumers? The changing market reality is already shifting power into the hands of the few. Ezrachi and Stucke explore the resulting risks to competition, our democratic ideals, and our economic and overall well-being.

Product Details

ISBN-13: 9780674241589
Publisher: Harvard
Publication date: 10/29/2019
Edition description: Reprint
Pages: 368
Sales rank: 806,319
Product dimensions: 5.40(w) x 8.20(h) x 1.10(d)

About the Author

Ariel Ezrachi is Slaughter and May Professor of Competition Law at the University of Oxford.

Maurice E. Stucke is Professor of Law at the University of Tennessee and co-founder of The Konkurrenz Group.

Table of Contents

Preface vii

Part I Setting the Scene 1

1 The Promise of a Better Competitive Environment 3

2 New Economic Reality: The Rise of Big Data and Big Analytics 11

3 Light Touch Antitrust 22

4 Looking beyond the Facade of Competition 27

Part 11 The Collusion Scenarios 35

5 The Messenger Scenario 39

6 Hub and Spoke 46

7 Tacit Collusion on Steroids: The Predictable Agent 56

8 Artificial Intelligence, God View, and the Digital Eye 71

Part III Behavioral Discrimination 83

9 Price Discrimination (Briefly) Explained 85

10 The Age of Perfect Price Discrimination? 89

11 The Rise of "Almost Perfect" Behavioral Discrimination 101

12 Behavioral Discrimination: Economic and Social Perspectives 117

13 The Comparison Intermediaries 131

Part IV Frenemies 145

14 The Dynamic Interplay among Frenemies 147

15 Extraction and Capture 159

16 "Why Invite an Arsonist to Your Home?" Understanding the Frenemy Mentality 178

17 The Future of Frenemy: The Rise of Personal Assistants 191

Part V Intervention 203

18 To Regulate or Not to Regulate 205

19 The Enforcement Toolbox 218

Final Reflections 233

Notes 251

Acknowledgments 345

Index 347

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