Strategic Information Acquisition in Platform Competition

Details

Supervisors

Johnen, Johannes

Faculty

Faculté des sciences économiques, sociales, politiques et de communication

Degree label

Master [120] en sciences économiques, orientation générale, à finalité approfondie

Abstract

Is it harmful for consumers that digital platforms have information about them? To answer the question, I study the information acquisition incentives of an incumbent platform threatened by entry. Platforms may be uncertain about the intensity of the cross-group network effects that sellers exert on buyers. The incumbent platform can use the data it has collected about its users to transform it into meaningful information that helps to learn the intensity. An entrant platform can only have information about the intensity of the cross-group network effects if it can leverage its information from another line of business. I find that buyers may benefit from information acquisition by an incumbent if it leads to higher network benefits. The incumbent platform has incentives to acquire information since it either allows to deter entry, or even if it does not help to mitigate competition, it helps to extract surplus from sellers. Moreover, information acquisition by an incumbent makes the entry for an uninformed platform risky.