Big Data Collection and Sharing: What Are the Effects on Collusion?
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Constant technological and digital evolution has enabled firms to acquire advanced tools to collect and analyze the so-called Big Data – a large set of detailed information on consumers’ behavior. In spite of obvious advantages for companies, that are now able to refine their demand forecasting tools, and consumers, who can benefit from goods and services that better fit with their needs, there are also some potential risks. In particular, more detailed and widespread information on consumers’ preferences may allow firms to implement price discrimination. From an economic point of view, this practice may have anti-competitive effects if it facilitates the creation and the sustainability of a collusive agreement. Although it is not possible to characterize in advance the impact of a higher degree of public or private information on the sustainability of a collusive agreement (thus requiring a case-by-case assessment – i.e., rule of reason), we can derive some results relatively to the information exchange between competitors. This article explains by means of basic economic theory the close relationship between Big Data and collusion, and shows that, under certain conditions, the exchange of private information can make, in contrast to the common wisdom, a collusive agreement between competing firms more difficult to sustain.
- Big Data
- Information Sharing
- Price Discrimination