Data Access, Consumer Interests and Social Welfare: An Economic Perspective

This chapter explores the economics of data markets and links this to market power in online platforms. It describes the basic economic characteristics of data and explores data-driven market failures, including monopolistic markets, externalities, information asymmetries and missing markets. It distinguishes between economies of scope in data re-use and in data aggregation. Re-use favours wider access to data while aggregation favours data concentration in large pools. Data-driven network effects in platforms may add new market failures. The social externality value of data implies that neither exclusive private rights nor data commons are an optimal governance regime. Digital platforms offer an intermediary governance regime that captures and monetises part of the positive data externalities through economies of scale and scope in data aggregation. Individual users cannot achieve these benefits on their own. However, data-driven network effects reinforce the monopolistic market position of platforms and can reduce welfare. Policy interventions need to carefully balance between these two poles. They could target negative externalities from data aggregation, asymmetric information between platforms and users, including self-referencing, and “newly missing” markets. The paper concludes with some topics that merit further discussion, including data access and innovation, the role of data in platform ecosystems and the dichotomy between consumer and social welfare benchmarks.