Governance by markets
Glossary
= Data as an input to market power (Sergey) =
In the present digital economy, data has emerged as a valuable economic commodity that entities leverage to gain a competitive edge over their rivals [1]. Data is an input into production, so businesses that control data can have market power and impede the entry of potential competitors. Market power refers to a firm's ability to influence the price, output, or other market conditions in its favour, without being constrained by competitive forces [2].
Data as an input to market power means that access to information can help a business limit the competitive pressure it faces. Information about searches, clicks or purchases can improve services and advertising. If competitors cannot obtain comparable information at a reasonable cost, they may struggle to offer an attractive alternative. This can allow a platform to raise prices or worsen quality or privacy protections without losing enough business to make doing so unprofitable. This matters even when a service is free, because competition also concerns advertising charges, personal information and the choices available. Data can be used repeatedly and by several businesses without being used up. However, access can be restricted through contracts and technical controls. Nevertheless, holding a large dataset alone does not establish market power.
Google Search illustrates this mechanism. Google controls over 91% of global search engine traffic [3] and uses information about users’ searches and the results they click to improve the relevance of its rankings. A larger volume of searches gives it more opportunities to learn, including about unusual queries that smaller search engines encounter less often. Better results can attract further use, producing additional information and reinforcing the advantage. A new search engine may therefore struggle to attract users while lacking the information needed to improve its service. Data access can constitute a significant barrier to entry when this type of analytics is necessary to participate in a market, particularly when alternatives are limited.
A platform’s control over data access can shape who is able to compete with it. By determining whether, and on what terms, rivals can access that information, a platform can influence the competitive opportunities available to others. This suggests that regulation should examine access to strategically important data alongside prices and market shares. Article 6(11) of the EU Digital Markets Act [4] reflects this approach: certain large search providers must, on request, share specified search data with rival search providers on fair and non-discriminatory terms, with relevant personal data anonymised. The aim is to help rivals compete while protecting users. A data advantage does not, by itself, establish unlawful conduct.
Would access to equivalent data enable a rival to compete effectively? The concept cannot answer this on its own. Additional data may eventually add little value, become outdated, or have substitutes. Firms also need the skills and computing resources to use it. Google’s default positions in browsers and devices can further restrict rivals’ access to users even if data become available. The unresolved issue is how much competitive advantage comes from data itself and how much comes from these other resources and arrangements.
= = Two Sided Markets (Ceren) = =
In two-sided markets, two sides of a market interact through an intermediary. These markets typically have some externality,Carl Shapiro and Hal R Varian, Information Rules: A Strategic Guide to the Network Economy (Harvard Business School Press 2010), 183. where the decisions of the sides affect the other. The intermediary also has multitudes of effects on both sides, mainly identified in the related literature through its pricing.
An example of a two sided market is payment systems, whereby the credit card providing bank is the intermediary between the customers and merchants. In this example, banks provide credit cards to customers to be utilized in their payments, and merchants accept payment via multiple credit card systems to accommodate payments from customers holding credit cards from such providers.
The main power of the intermediary materializes in their pricing toward the merchant (and the merchant’s bank in interchange fees in case of payment being transferred through different banks). Customers will be expected to be more loyal, holding a few credit cards, whereas merchants accept payment from many banks to accommodate all customers’ payment methods. Banks will provide more subsidies to customers to attract them and compete aggressively on the customer side, making their platform more desirable to work with by merchants, who will in turn be more accepting of the platform’s fees to gain the business of the larger volume of customers. However, dynamic pricing (increasing fees after gaining entry and loyalty) may be a way for these platforms to abuse their power.
The concept may be derailed from these logical / analytical systems of operation or expected outcomes when public policy interferes with the market. For example, net neutrality rules regulate what internet service providers (the intermediary) can charge content providers (one side) who aim to reach the consumers (the other side). In this case the above considerations and the concept are halted.
Switching costs and lock-in (Kate)
Definition
When you move from one product or service to another, switching costs are everything you have to either give up or spend. This can include money, time, lost contacts, etc. Lock-in is when you feel (and are) trapped by these costs that add up and you decide instead of moving products or services, it’s just easier to stay with a service, not because you want to but because it’s just too much of a hassle. This is true even if a less expensive or better service exists all because leaving the product/service just costs too much in terms of time, effort, and money. Shapiro and Varian (2010) argue that switching costs are normal in information markets and that the full cost of a switch includes what you as the customer pay and what a new supplier spends to win that customer over.
Example: Apple
The more Apple products you own, the harder it is to leave. As an avid Apple user, I am absolutely stuck in their ecosystem. I have my photos in Apple’s iCloud, my group chats in iMessage, and my Apple Watch only works with an iPhone. Leaving Apple is not easy. So much so that in March 2024, the US Department of Justice sued Apple alleging it raises costs of leaving/switching phones by making messaging worse and less secure when you’re messaging with non iPhones. In June 2025, Judge Julien Neals denied Apple’s motion to dismiss and the case is still in pre-trial proceedings.
Governance implication
Lock-in makes users dependent on a platform and because of that, once we’re locked in, the platform (Meta, Apple, Google, etc) can raise prices, show more ads or even provide lower quality terms. So in this way, the platform can control users because if a user wants to leave, it’s going to cost you in that the platform has already designed your exit including how you can export your data, licenses and APIs. Under the EU’s Digital Markets Act, the European Commission adopted decisions in March 2025 making Apple open nine iOS connectivity features, mostly used by devices like smartwatches, headphones and televisions. These decisions are legally binding and they focus on lock-in by lowering the cost of choosing non-Apple products. It’s worth noting, however, that they only apply in the EU. When the Commission adopted the decisions, Apple said (reported by MacTech) “It’s bad for our products and for our European users.”
Open Question
So what happens when the cost of leaving isn’t just your own costs as a user but also the cost of leaving family and friends behind? If a user leaves, let’s say, Instagram, they won’t be charged to leave (they will, however, have some friction to leaving in that they’ll be asked why they’re leaving and if there’s anything Instagram can do to make them stay), but they will be leaving their family and friends that stay on the app. This is where data portability can’t really help because while you can export your photos, you can’t make your friends leave. This is part of what makes leaving a network or platform so hard.
References:
European Commission (2025, March 19). Commission provides guidance under Digital Markets Act to facilitate development of innovative products on Apple’s platforms. https://digital-markets-act.ec.europa.eu/commission-provides-guidance-under-digital-markets-act-facilitate-development-innovative-products-2025-03-19_en
MacTech (2025, March 19). Apple isn’t happy with the latest decisions regarding the DMA. https://www.mactech.com/2025/03/19/apple-isnt-happy-with-the-latest-decisions-regarding-the-dma
Shapiro, C. & Varian, H.R. (2010). Information Rules: A Strategic Guide to the Network Economy. Boston, MA: Harvard Business School Press.
The Hill. (2025, June 30). Judge rejects Apple’s bid to dismiss DOJ antitrust case. https://thehill.com/policy/technology/5380007-apple-federal-judge-antitrust-case/
The Mac Observer. (2026, September 12). Apple’s other antitrust fights: Where the DOJ case and the UK’s CMA stand now. https://www.macobserver.com/news/apple-doj-antitrust-case-uk-cma-status/
U.S. Department of Justice (2024, March 21). Justice Department Sues Apple for Monopolizing Smartphone Markets [Press Release]. https://www.justice.gov/archives/opa/pr/justice-department-sues-apple-monopolizing-smartphone-markets
Excludability and rivalrousness (Paul)
Excludability and Rivalrousness
The terms excludability and rivalrousness both refer to consumption characteristics that can be assigned to- or identified in goods.
Excludability: Goods to which economic actors can technically or legally restrict access are considered to have ‘high excludability’. Conversely, goods to which access cannot be restricted are of ‘low excludability’, or, in absolute terms, ‘non-excludable’.
Rivalrousness: Rivalrousness on the other hand refers to the finitude of the good in question. The greater the depletion of the stock, quantity, or amount is on account of one party’s consumption, the more rivalrous a good is.
Tabulating the characteristics against one another allows for inference and definition of the type of good an object, service, or resource may constitute (see fig. 1). Excludability and Rivalrousness of goods can therethrough serve as a predictor for certain types of market failures: Goods which are non-excludable or of low excludability, but nonetheless costly to provide, are vulnerable to so-called free rider problem. Goods which are non-excludable, but highly rivalrous (common goods), may lead to the tragedy of the commons, that is over-exploitation.
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AI Training and the (non-)excludability of information
The unusual nature of excludability and rivalrousness of data further compromises the applicability of the goods classification built thereon. In traditional economics, a non-excludable and non-rivalrous good would be seen as a public good. This does apply insofar as data is vulnerable to corporate exploitation without commensurate indemnification. Data usage may however actually be anti-rival in the sense that increasing aggregate usage increases the value of the data (better labeling, easier access, previously undrawn conclusions, etc.), rather than diminish the ‘stock’ of data. Conversely, data may be rivalrous not in its absolute depletion by consumption, but rather the benefit or competitive advantage usage of that data may confer: If all AI firms are able to train on the exact same data (all available data), the utility of that data may still increase, but the competitive advantage of possessing that data is exhausted.
Free-Rider Problems & Public Data
As any party can benefit from publicly available data at no cost or low cost, the incentive for private market actors to fund its creation is comparatively weak. Consequently, public bodies (and less frequently open-source foundations and non-profits) often assume the responsibility for the provision of this type of data. A classical example is weather data and its creation by national weather agencies.
Interoperability (Sisi)
- What is interoperability?[1]
Interoperability is a “standards-based” approach that enables different IT systems to communicate with minimal end-user interaction to exchange data and “share functionality”. Each system also allows the other system to “read, update, modify, and analyze” data with minimal human interaction. [2]
Interoperability works by having different systems share data by employing the same standards for data formats (e.g., Extensible Markup Language or JavaScript Object Notation), exchange, and vocabulary to title data elements. These standards are agreed upon “in advance” by organizations, industry types, and user groups. Then, software developers build the system based on the model agreed upon.
- Concrete example from a digital technology or platform
Interoperable systems are vital in healthcare, commerce, and public safety. A notable example includes the integration of Electronic Health Records (HER). This system allows different healthcare providers to securely access and share personal patient information regardless of the specific EHR system used.[3] An example of such a system is the GNU Health Hospital Information System, which is a model employed by small private offices and large national public health systems.[4]
For example, a health care professional may access lab results and patient history data from various platforms to enable them to make a diagnosis.
- One governance implication: what does this concept explain about how platforms exercise power?
Interoperability is a powerful tool because it helps provide a “seamless user experience” and optimizes data sharing between separate systems. It helps companies and organizations access data from multiple sources and improve efficiency, such as accelerating workflows and reducing the possibility of errors by pooling data from its sources.
Interoperability standards are mandated by law on the technical side to ensure “critical systems” are compatible, especially in public safety and health. [5]
In Europe, interoperability is governed by the European Health Data Space regulation (EHDS); the “first common EU data space dedicated to a specific sector as part of the European strategy for data.”
This Regulation aims to benefit EU citizens such as patients, researchers, healthcare professionals, and industry players by establishing a common framework for the exchange of electronic health data within the EU. In addition, it enables certain data to be “reused” for public purpose and innovative scientific research. [6]
- Where does the concept break down or fail to explain something
While the EDHS harmonizes a legal and technical framework for sharing EU data, its shortcoming is its gradual implementation. The EDHS entered into force in 2025; however, most of its obligations will not apply until 2029. This leaves four years for health care companies to use interoperability in a deregulated manner. [7]
Furthermore, there are actual barriers to achieving full interoperability in healthcare, including data silos (which isolate data collections and hinder data exchange), lack of standardization (where one system records blood pressure as free text, another system stores it as a structured numeric value), and deficient infrastructure, which requires significant technological upgrading.
The burden remains on health companies to decide which standards to adopt and how much to invest in stable technological infrastructure to strengthen their data governance and interoperability. [8]
Definition:
A Monopsony is a market condition where there is one buyer and multiple sellers; the opposite of the better known non-competitive market - Monopoly. Here, the buyer has the power to control the price and set market conditions.
Digital platform: Uber
Definition:
Uber was released into the market as an online platform to connect drivers with customers - but it’s business model created a huge social and economic impact in the labor sector. (1) Uber engaged drivers on a contract basis and offered short-term, low commitment and flexible jobs, which we characterise as the ‘Gig economy’. Uber offered a better transportation network alternative - dynamic pricing, more operating efficiency and on-demand mobility in contrast to the rigid capacities and fares of conventional transportational means available (mainly taxicabs), which would soon be replaced.(2) Additional social perspectives showed fair, non-discriminatory and safer practices - such as access and availability to lower economic groups.
How power is exercised
1. Capturing labour force: The primary economic impact in the labour space is with regard to human capital mobilisation; a 2014 survey showed that 36% of 600 Uber drivers reported neither having a job, nor actively seeking work, before signing up to drive for Uber. (3) The presence of Uber resulted in increased regional employment. Drivers valued the flexibility and self-supervision enough to accept lower earnings than in previous jobs.
2. Control of price and contractual terms: Uber exercises vertical control by dictating terms on which drivers transact and fixed prices - independent contractors are not allowed liberty to negotiate.
3. Horizontal friction: Assimilation and use of dominant position in one sectoral space to be able to expand into another such as in the case of Uber Eats. While Uber has since started to reduce it’s region specific operations by selling their holdings to the local leading brand, such as in China with Didi, they maintain equity shares as a control mechanism.
Where does the concept break down or fail to explain?
A highly non-competitive market structure, is one wherein the buyer and seller cannot freely move within the market, curbed by inefficiency, high barrier of entry and lack of innovation. But modern day monopsony looks alot more different than this traditional concept. For one in this case, Uber was a new innovation brought into the market to outdate the old inefficient model of taxis with more control by its users. Moreover, monopsony can exist even in settings that appear easy to enter or leave.(4)
While it may not be a pure monopsony, Uber does hold 71% market shares in the TNC space in the United States. However, the lack of barriers for entry saw Lyft introduced at the same time, where both provided similar models and impacts, with consumers switching between platforms.
References:
(1) Koling, A., Michalek, J., Armanios, D. et al. Effects of Uber and Lyft on jobs, wages and GDP. Nat Cities 3, 700–707 (2026). https://doi.org/10.1038/s44284-026-00478-0
(2) Zha, L., Yin, Y. & Du, Y. Surge pricing and labor supply in the ridesourcing market. Transport. Res. Proc. 23, 2–21 (2017).
(3) Levin, A. The Driver Roadmap: Where Uber Driver-Partners Have Been, and Where They’re Going (Benenson Strategy Group, 2014).
(4) Manning, A. (2021). Monopsony in Labor Markets: A Review. ILR Review, 74(1), 3-26. https://doi.org/10.1177/0019793920922499.
Multi-homing (Juliette)
1/ Plain-language definition
Multi-homing means using two or more competing platforms at the same time, for the same thing. A shop that sells on both Amazon and Bol.com is multi-homing. A person who has both WhatsApp and Signal on their phone is multi-homing too. The opposite is single-homing, when you use only one platform. When people multi-home, it is easier for them to leave a platform, because they already have another one ready (1).
2/ Concrete example
Taxi apps are a good example. In many cities, drivers have Uber and Bolt open at the same time. They take the first good ride that comes. Many passengers, however, use only one app because they are used to it. So drivers can move between apps, but each app keeps its own group of loyal passengers. If a driver wants those passengers, he has to stay on that app. This means the app still has power over drivers, even if they use several apps (2).
3/ Governance implication
Multi-homing shows why platforms try hard to keep users on one service only. They do not usually ban other apps. Instead, they make using them less attractive. Taxi apps give drivers bonuses if they do a certain number of rides on the same app. Online shops and hotel booking sites have stopped sellers from offering lower prices on other websites. In this way, the platform makes its own rules. It controls what users do without a formal contract. Regulators now want to protect multi-homing. The Digital Markets Act’s article 5.3 says large platforms cannot stop businesses from offering better prices elsewhere. It also says users must be able to take their data with them (article 6.9) and leave a service easily (article 6.13) (3). The idea is that if people can use many platforms, no single platform can control them.
4/ Open question
We often think that multi-homing reduces the power of platforms, even if it is not always true. If only one side multi-homes, the platform can ask that side to pay more, because it controls access to the loyal side. Research shows that the result depends on who multi-homes. Sometimes the group that should win actually loses (2). The authors Bryan and Gans even find that in some cities, one taxi app can be better for society than several (4). Also, multi-homing does not show how much people really use each platform. Someone can have two accounts but use only one. While multi-homing is easy to see, his understanding remains complex.
5/ Bibliography
(1) Belleflamme P and Peitz M, 'Platform Competition: Who Benefits from Multihoming?' (2019) 64 International Journal of Industrial Organization 1
(2) Bryan KA and Gans JS, 'A Theory of Multihoming in Rideshare Competition' (2019) 28 Journal of Economics & Management Strategy 89
(3) Regulation (EU) 2022/1925 (Digital Markets Act) [2022] OJ L265/1
(4) Zhu F and Iansiti M, 'Why Some Platforms Thrive and Others Don't' (2019) Harvard Business Review (January–February) 118
Vertical Integration by Pablo Latorre
1. Definition
“Vertical Integration” is the control by a single corporation of two or more consecutive steps of the same production chain of activity in such a manner that said corporation does not need to rely on others for them (1). In the context of digital markets, “Vertical Integration” usually refers to the position of a platform that operates a marketplace or infrastructure that other enterprises depend on and, at the same time, commercializes products or services in that same space (2). Therefore, in a “Vertical Integration” the platform is both, provider and competitor, of other enterprises.
2. Example: Amazon as a Marketplace
Amazon operates the largest online marketplace (3) in the world and, thus, thousands of small and medium size enterprises depend on it to connect with their costumers. At the same time, Amazon commercializes its own products on its marketplace (4), acting as a retailer and competitor to those enterprises. Such dual role allows Amazon to exercise competitive advantages: first, it can access detailed, non-public data on the enterprises’ sales, including products, prices, and costumer behavior; and second, it can decide the rules that define the products that appear first as the result of a costumer search.
In 2022 Amazon had to commit to the European Commission to not use the enterprises’ non-public data for its retail business and to treat equally rival offers in its “Buy Box” (5). Currently, the Digital Markets Act (DMA) establishes matching general obligations for designated gatekeepers (6).
3. Governance Implication
“Vertical Integration” allows platforms to exercise power over enterprises through digital architecture. When a platform operates a marketplace and competes in it, its ordinary decisions on digital architecture (i.e. on algorithms, searches, products visibility) can become tools for power and competition. In a sense, platforms are the de facto private regulators of markets in which they have clear commercial interests. Such state of affairs allows to understand a strategy change in antitrust cases. Traditionally, antitrust intervenes after the harm, however regulators are moving towards ex ante conduct rules (i.e. the DMA) (7).
4. Open Question
“Vertical Integration” clearly explains the incentive structure that drives platforms to favor their own products through the exercise of digital architecture mediated competitive advantages. However, “Vertical Integration” assumes that the line between one product (i.e. the marketplace, the search engine) and the other (i.e. the products, the websites competing on the platform) is clear when, in practice, this is not always so. For instance, nowadays when a user search something in Google Search, Google not only provides links to websites that contain the desired information but also the desired information itself with AI-generated summaries. In this case, two possible perspectives arise: on the one hand, that Google could be abusing its position to capture the online information market by displacing websites that depend on it; on the other hand, that Google could be simply improving its search engine and search itself because what users actually want is information and not links to it. In this example, “Vertical Integration” is incapable of settling the issue because it depends on a clear distinction between one product and the other (or one market and the other) and that is absent in this case. Moreover, even if in the presented case was possible to separate one product from the other (or one market from the other), “Vertical Integration” does not provide a clear criteria to establish when an “integration” is abusive exclusion of competitors and when it is legitimate and necessary innovation.
References
(1) “Vertical integration” (Cambridge Dictionary) https://dictionary.cambridge.org/dictionary/english/vertical-integration accessed 4 October 2026.
(3) Lovell Keir, “Top 10 Ecommerce Marketplaces in the World: 2026 Rankings by GMV, Users & Reach” (ServeRetail, 2 January 2026) https://www.serveretail.com/blog/marketplace/the-10-largest-ecommerce-marketplaces-in-the-world-size-reach-and-cx-strategy/ accessed 4 October 2026.
(4) Ellison Mara, “What are Amazon's Brands, Explained” (Ir Mountaintopuniversity Ng) https://ir.mountaintopuniversity.edu.ng/article/what-are-amazon-s-brands-explained accessed 4 October 2026.
(7) OECD, "Ex Ante Regulation and Competition in Digital Markets" (OECD Roundtables on Competition Policy Papers, OECD Publishing 2021) https://doi.org/10.1787/c83e178d-en accessed 4 October 2026.