CCP Annual Conference 2015 Live Blogging Session 6: The Value of Information

Steve Tadelis (University of California, Berkeley, USA @BerkeleyHaas) talked about the challenges faced by market platforms in the presence of reputational externalities and biased feedback. Reputation mechanisms used by platform markets suffer from two problems. First, buyers may draw conclusions on the quality of the platform from single transactions, causing a reputational externality. Second, reputation measures may be coarse or biased, preventing buyers from making proper inferences.

Steve explored the limits of reputation mechanisms, their impacts on the marketplace, and ways in which a platform designer can mitigate these adverse impacts. By using an unobservable measure of seller quality, Steve demonstrated the benefits of the approach of a large-scale controlled experiment with eBay data. He claimed that platforms can benefit from identifying and promoting higher quality sellers. By highlighting the importance of reputational externalities, he also charted an agenda that aims to create more realistic models of platform markets.

Nick Anstead @NickAnstead (London School of Economics and Political Science) presented a paper that addresses a number of questions raised by the development of data-driven campaigning techniques. The recent General Election in the UK saw a very data-intensive campaign. Parties harvested massive amounts of information from both traditional and more modern sources, seeking to use them to better target the voters predicted to be more central to their success.

Nick revealed the source of the datasets used by political parties and he highlighted the reasons for the adoption of new methods. He discussed the effectiveness of the ways in which the parties used the data in the recent UK elections. Finally, he mentioned the effect of such methods on citizen participation and the quality of democracy.




CCP Annual Conference 2015 Live Blogging Session 5: New products – New Regulation?

Franco Mariuzzo (Centre for Competition Policy and School of Economics, University of East Anglia @UEA_Economics) presents his work on mobile applications, which is a fast-growing market whose proper regulation deserves attention.. In September 2014 more than 1.3 million apps were available in the Apple and the Android app stores. This market has low barrier to entry and has a high degree of competition.

He argues that strategic versioning is profitable for application developers because they will be able to use it to attract new customers, leading to continuous growth of downloads. A stylized theoretical model is presented to describe why and when updates should be released by developers in order to maximise profits. Then an empirical test is conducted using data on the top 1000 apps on Apple and Google Play stores for 5 European countries over 2 years. His finding confirms that, in general, updates to applications boost downloads and are more likely to be released when the app is experiencing a drop in downloads. He cites the finding as evidence that developers use updates strategically in order to “resurrect” their applications.


John Street (Centre for Competition Policy, University of East Anglia @Politics_UEA) discusses creativity and copying in the digital age. John states that there is a parallel music industry between digital and analogue, which runs in both complementary and conflicting ways. Differing considerations apply in each. The increasing use of digitisation and the fight between streaming companies and record companies is expanding.

John looks at how “creativity” and “copying” are distinguished in the musical world, by exploring the politics of the words. Having looked at the manifestos produced for the recent general election, John shows how the politics of digital markets controls how we see copyright. There are competing claims, economic, public policy and natural/moral rights. These three principles leads to different outcomes, which is supported by legal commentary.   John asks what the ends should be. The answer to this question leads to the adoption of a certain copyright basis. John argues that even within national systems, different opinions abound.

John also looks at the legal cases, the choices of artists and their decisions in making music. Having delved down into the decision making process itself, to determine what is “original” and what a “copy” is, John, with the help of case studies, argues that the decisions of all actors in the field are political in various ways. This extends to who makes the decision. Is it a judge, a jury or an expert? Each have different approaches and views as to what is copying and what is not.

John states that these issues have important implications for the regulation of the digital music market. John argues that a good copyright system can be identified by what kinds of political principles inform its rules, how decisions are made and who is involved in, and influences the system.



CCP Annual Conference 2015 Live Blogging Session 4: Trust in Digital Markets

Alex Chisholm (Competition and Markets Authority @CMAgovUK) opens up Session 4 with his presentation on “Data and Trust Concerns in Digital Markets: What are the Concerns for Competition and for Consumers?”. A transcript of his speech will be available to download from the CMA website later today.

Speech delivered at 11th CCP Annual Conference

CMA Chief Executive Alex Chisholm delivers speech on “Data and Trust Comcerns in Digital Markets”

Jonathan Porter’s (Ofcom @Ofcom) presentation mainly covers the economics of personal data and data privacy, the practical issues with informed consent in an on-line word and the potential implications for Ofcom’s work on the ‘Internet of things.’ He discusses the application of both the standard economic framework and behavioural biases to the analysis of data privacy concerns. He talked about the impact of technology on privacy and the economics of privacy to consumers and firms. The key features are (i) the market for personal data (ii) the market for privacy can be thought of as two sides of the same coin leading to different trade-offs between costs and benefits and (iii) the positive/negative externalities from data transmission.
When consumers are irrational, the market will then not be able to provide the efficient level of data privacy. The informed consent is a key concept that has underpinned the legal framework for personal data processing. In practice, people do not read the privacy policies and 55% of the internet users spend 15 seconds reading the privacy policy statement. This can be due the difficulty in understanding the ‘legal jargon’ privacy policy. He added that understanding could be improved by using software tools: browser add-ons, different formats, visual prompts, “smarter” notifications and Just-in-time “nudges”. Building awareness and effective communication to improve consumer engagement are some of ways that might improve the chance that consumers act upon information.


Greg Taylor @EconTaylor (Oxford Internet Institute) rounds off Session 4 by considering how the existence of contracts between firms and intermediaries affect, on the one hand, the quality of advice received by consumers and, on the other hand, firms’ incentives to invest in improving the quality of their products. It is important to consider these dynamics as, in many industries, consumers rely on advice and recommendations from an intermediary when choosing between competing products. Moreover, competition concerns lie in the fact that intermediaries in many industries are not independent of the market. Indeed, an intermediary may be owned by a firm in the market, thus raising concerns regarding its objectivity.

Greg takes us through the paper which he has co-written with his colleague Alexandre de Cornière. They use a ‘quality competition model’ that involves one intermediary and two firms who choose how much to invest. Greg explained the contrasting behaviours of an informed and uninformed consumer when selecting an intermediary firm. In Nash Equilibrium, profits are zero. He then considered the situation in the context of vertical integration. The non-integrated firm (without intermediaries) experiences a greater incentive to invest in low quality products than products of high quality. However, the integrated firm will have a greater incentive to invest in order to benefit from economies of scale. Greg cites the Google case as an example of this application.

In terms of price comparison, under vertically integrated situation, in equilibrium, (i) all prices increase, (ii) consumer welfare ambiguously falls, and (iii) the endorsed firm is always the ‘worst one’. Where quality is the main dimension of competition, the integrated firm has a high incentive to invest, whereas the non-integrated form will have a low incentive. In this instance, no consumers can benefit from becoming informed when the intermediary’s profit is maximised.



CCP Annual Conference 2015 Live Blogging: Start of Day 2

Welcome to the start of the second day of the Centre for Competition Policy’s 11th Annual Conference on Competition in the Digital Age.


CCP Annual Conference 2015 Live Blogging Session 3: Platforms and Price Relationship Agreements

Kai-Uwe Kuhn (University of Michigan, USA @umichECON) shed light on recent cases involving platform intermediaries, e.g., hotel booking and price comparison websites, by disentangling the effects of best price clauses offered by those platforms. By exploring the demand elasticity effect, substitution effect and entry-deterrence effect of best price clauses, Kai-Uwe commented on the anticompetitive impact that best price clauses bring about. Best price clauses could lead to higher prices since they tend to lower the levels of competition between service providers such as hotels. But since the best price clauses only affect end consumer substitution rather than seller substitution, the investment incentives are not necessarily undermined. We are in a dynamic environment in which there is an increasing trend of integration between booking and price comparison websites. Whilst issues in these two-sided markets remain complex, Kai-Uwe suggested that one could approach the problem by examining incentives under each separated vertical relations.


Matthijs R Wildenbeest (Indiana University, USA @KelleyIndy) presented work co-authored with Babur De los Santos (Indiana University), regarding the impact of vertical price restraints in the market for e-books. Their analysis is based on a suit filed by the Department of Justice in 2012 against five e-book publishers and Apple. In 2010, these publishers simultaneously adopted the agency model, which allowed them to directly set e-book prices. Amazon, who at the time followed an aggressive pricing strategy, was forced to adopt the agency model as well, along with other retailers.The suit resulted in a settlement that prevents the publishers from interfering with retailers’ ability to set e-book prices.

Using a unique dataset of daily e-book prices for a large sample of books across major online retailers, Matthijs and Babur estimate the effect of the return to wholesale model on retail prices. Their analysis reveals that e-book prices for titles that were previously sold using the agency model decreased by 18% at Amazon and 8% at Barnes & Noble. They found a stronger effect on the fiction genre, which is a more competitive book market. Their results illustrate a market where upstream firms prefer higher retail prices than downstream retailers. These findings help shed some light on the effects of the agency model on pricing. Matthijs suggests that they could be applied to other markets using agency models.



CCP Annual Conference 2015 Live Blogging Session 2: E-Discovery The Challenge to Enforcement

Andy Gavil (Howard University, Washington DC, USA @howardlawschool) discusses the challenges made to competition enforcement by advances in technology, especially computers and information storage systems.  Andy examines the institutional challenges for competition law enforcers and courts in trying to cope with the joining of more demanding standards of proof and the increasing amount of electronically stored information (ESI).  This information, whilst being informative, is available in large quantities.  Andy argues that whilst the move towards a new “effects-based” analysis creates more accurate decisions, there is less clarity and greater costs.  Information is not costless.  Andy points out that the mass increase in information does not mean that the process is extending, indeed the increasing technological advances do lead to some cost and process reductions.

Andy points out that there are three problems: technical (understanding technology), procedural (how does ESI fit within the system), Analytical (assessing its use, reliability and accessibility).  Andy gives the example of Technology Assisted Review to show how technology has advanced to such a stage where technology attempt to provide what a paper search would achieve.

Whilst procedures and strategic considerations that have guided competition investigations in the pre-digital age can be adapted to accommodate this increase in information storage, new procedures and considerations are still needed.  Given the effects-based analysis and ESI, the evidentiary requirement of economically-informed decision-making will need to be balance against the costs and technical challenges of information-driven decision-making. A probing cost-benefit analysis of the information itself will be needed.   Andy states that there are numerous challenges in terms of technology understanding, capacity, increased cost and guidance.  Potential countervailing benefits include reduced cost (compared to hand review), greater efficiency and increased accuracy.

In striking the balance, several possibilities exist.  First, do we reach a point of diminishing returns?  Second, do we create more error due to information overload?  Or is the answer somewhere in between.  Whether the balance exceeds the cost depends on who you are: consumer, party to the investigation or agency?


Orla Lynskey @lynskeyo (London School of Economics and Political Science) questions where competition law can protect privacy, and whether competition law can enhance and compliment data protection. There are many practical problems with this use of competition law which mean that the fundamental rights of individuals are best protected by the laws designed specifically for that purpose.

The European Commission’s competition law challenge of Google in the market for internet search seems to lack characteristics which most competition cases possess, such as clear foreclosure of rivals. The key concerns of the EC seem to be the preservation of plurality in information sources and the freedom of individuals to receive information – concerns which fit more easily into a framework of individual rights rather than competition law.

Increasingly, consumer data and its privacy has drawn the attention of competition authorities. The US FTC, the EU’s DG Comp and the UK’s CMA have all recently published research on competition *and* privacy/data protection issues raised by the use of consumer data. How possession of data by businesses may lead to dominant market power is a common theme in these reports. The complication here is that dominance is not, in itself, an infringement of competition law. If use of consumer data is instead regarded as an abuse of a dominant position then the complication becomes the fact that the behaviour must be legal if carried out by a non-dominant firm. Harm to consumers must be shown in any case, since competition law is not intended to protect competitors from harm. This may suggest that competition law is not amenable to being used for the protection of data privacy.

A counter-argument is that it is a legal necessity that competition authorities protect the fundamental rights of citizens, which include privacy and data protection. This is especially true of competition authorities which also have consumer protection responsibilities. It is debateable whether consumer choice is an objective for competition law enforcement, or whether this provides undue protection to competitors.

Many arguments in favour of the application of competition law to privacy are of questionable legitimacy. Competition law is very powerful compared to other types of laws, they may easily be targeted at companies and there are well-funded institutions dedicated to its application. It may also provide another “bite of the cherry” if a case made purely on privacy and data protection grounds fail. It may be that the issue is one of regulation rather than competition, however the regulation is very much already there.



CCP Annual Conference 2015 Live Blogging Session 1: Setting the Scene

Morten Hviid and Franco Mariuzzo opened the conference and welcomed the participants. The first session of the day aims to set the scene for the conference. The broad nature of the issues raised and the attention which digital markets have received recently make this a timely topic.

Danilo Montesi (Department of Computer Science and Engineering, University of Bologna, Italy), in his talk titled “Big Data & Social Science: A Data Driven Society?” discussed the effect that the large amounts of data generated by the internet has on society. The average American consumes 34 GB of data every day, spending 11 hours a day connected to the internet, watching television or making phone calls – data is gathered on all of this consumption. Such is the importance of data that it may be considered a major factor of production in the economy, alongside labour, capital and land.

Practical techniques include the PageRank tool used by Google to decide the order in which results for a search query should be presented. A consequence of this algorithm is that a few pages tend to dominate search queries, especially given the tendency of users to favour heavily the first search result given. The amount which businesses are willing to pay in order to appear higher in search results indicates the value they put on consumers’ attention. The average “Cost-Per-Click” is around $1 for most search queries but can be as high as $54 for queries such as car insurance or lawyers.

Certain types of data lend themselves to use by data scientists to provide a unique “fingerprint” for a given user. This is important because if a single user can be associated with multiple accounts across different networks then the resultant combined network provides much more information than any individual network. Data from photographs taken by people with their smartphones and digital cameras are an excellent source of such data. Research shows that with a sample of photographs from various social networks it is possible to identify photographs as belonging to the same users across the networks extremely accurately.

Technical solutions may arise in response to legal barriers. Peer-to-peer file sharing networks first arose to evade laws against the copying and sharing of copyrighted material. The “sharing economy” has now expanded far beyond its illegal roots. Wikipedia is many times larger than other encyclopaedias and research indicates it is no less accurate. Commercial encyclopaedias such as Britannia and Microsoft’s Encarta have left the market because of an inability to compete with Wikipedia. “Social” news services such as Reddit and Huffington Post are expanding greatly at the expense of conventional news sources such as print newspapers.

The implication of all of this may be that an increasing amount of human behaviour and decisions are determined by data. People may choose which hospital they use, which school they send their children to, or where to buy a house on the basis of data which was not available several years before. The structure of employment is also likely to be changed profoundly by the use of big data. Professions such as telemarketers and accountants may be largely eliminated by big data where other professions, such as dentists and personal trainers are likely to be unaffected.

Paul Bernal @PaulbernalUK (University of East Anglia @uealaw) explored how profiling and ‘personalisation’ can impact on privacy and autonomy in a pernicious way. His talk looked at some current examples, from online shopping and behavioural advertising to the interaction between the big players on the internet, the internet of things and more. He demonstrated that misunderstanding of perceptions and expectations of privacy can lead to disastrous results all around and suggested some potential ways forward and implications for the future.

Paul is investigating, from the perspective of the individual, how to protect our autonomy in the world of big data. The issue arises from the fact that even if people do the same things, they see a difference in results. For example, a study was done that Orbitz recognizes types of users’ computers in order to identify the more expensive equipment and to provide, on the basis of their tracking of on-line activities, more expensive offers for hotels. A new study reveals how Facebook “likes” say a lot more about a person than we first think: a wide variety of people’s personal attributes can be automatically inferred using their Facebook likes. The specific analysis shows that it can be used to improve products and services and businesses can obtain advantages from using it.

Computational linguistics reveals there is only the illusion of neutrality. For example, Wikipedia articles are biased against women according to an analysis of six different language versions of the online encyclopaedia. One more experiment – on Facebook users – demonstrated experimental evidence of massive-scale emotional contagion through social networks. It is significant because emotional states can be transferred between users via emotional contagion, leading people to experience the same emotions without their awareness. It gives grounds for manipulation to make people to use Facebook more often.

Paul demonstrated that both sides – giving and receiving information – matter and argues that the idea that search engines are organic and neutral cannot be true. Actually, they are what we want them to be and they do what we want them to do. It seems that today advertisers are more likely to suffer from further integration than consumers. The European Commission has filed complaints against Google over its alleged anticompetitive behaviour.

That is why we need algorithmic transparency: it should be possible to test by results, rather than by theory, how neutral the results of our searches. This has many implications: most users are not aware that their results have been tailored to them. This results in issues of consent; problems with accurate personalization and inaccurate personalization when wrong decisions have been made on the basis of results; mismatch of needs; misuse of systems; vulnerability of data; and vulnerability of systems.

Finally people have to be aware of potential risks, otherwise there is a risk of negative implications because big data techniques can be easily be applied to large numbers of people without obtaining their individual consent. People need to able to be aware about risks; there is a need for an informed judgement from legal perspective. Today the main question is: Who are big data changes actually serving and in whose interests? People need to be aware that their interests may be different from those of businesses.


Tony Curzon-Price @tonycurzonprice (Competition and Markets Authority @CMAgovUK) looks into how price-comparison websites are a competition issue and solving the search problem, which is the theme of his presentation. He first talked about the risk of becoming a slave to new digital monopolists.

He then explained the difference between the Bertrand world where people pick the cheapest and the diamond world where instead of price undercutting, there is overcutting and selling at a much higher price. He explained how search technology how evolved from the traditional techniques to the internet in terms of saving of man hours.

An overview of the car insurance market in terms of the insurance providers, shopping behaviour and purchasing behaviour was provided. He explained how price comparisons website get consumers’ attention through advertising on Google and concluded that price comparison leaves us with a Bertrand-Diamond model with intense competition among providers but a monopoly price facing the consumer, with the middleman taking all of the surplus.



CCP Annual Conference 2015 Live Blogging: Start of Day 1

Hello and welcome to the live blog of the Centre for Competition Policy’s 11th Annual Conference on Competition in the Digital Age. The volunteer blogging team here in the Julian Centre at the University of East Anglia is Prishnee Armoogum, Shaun Bradshaw, Richard Havell, Liang Lu, Ioannis Pappous, Natalya Mosunova, David Reader and Weijie Yan.

Summaries of the presentations given during the conference will be published shortly after the end of each session. These posts are intended to be an aid to participates during the conference and to be a lasting record of the conference. All questions and discussions at the conference are subject to the Chatham House Rule.

You can easily follow the individual presentations on twitter by checking the CCP’s twitter account at @ccp_uea or by using the conference’s hashtag #ccp2015conf