Working Paper: NBER ID: w30022
Authors: Jan Eeckhout; Laura Veldkamp
Abstract: What does market power look like in a data economy? Economists typically use markups to measure market power. However, we use a simple model to show how firms’ growing stocks of data can change markups, without changing their power to affect prices. Data’s effects depend on how markups are aggregated. Growing data can produce differences in markup measures that match empirical facts. Markup aggregation wedges can measure data stocks and offer a way to purge markups of data’s effects to reveal market power.
Keywords: data; market power; economies of scale; markups; competition
JEL Codes: D8; E3; L0
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| data (Y10) | marginal costs (D40) |
| data (Y10) | production (L23) |
| production (L23) | market power (L11) |
| data (Y10) | risk (reducing uncertainty) (D81) |
| risk (reducing uncertainty) (D81) | investment (G31) |
| investment (G31) | production (L23) |
| production (L23) | markups (D43) |
| data (Y10) | markups (D43) |
| data (Y10) | forecasts (G17) |
| forecasts (G17) | investment (G31) |