Research and publications
Research (selection)
Pricing algorithms out of the box: a study of the repricing industry
with Giacomo Calzolari. Journal of Competition Law & Economics, January 2025, nhaf003, https://doi.org/10.1093/joclec/nhaf003.
Abstract: Businesses, including sellers on online marketplaces, are increasingly adopting repricing algorithms, which autonomously set prices. Despite concerns about potential consequences such as inflated prices in online marketplaces, there is a notable lack of research focusing on the supply-side dynamics of the repricing industry. In this study, we address this gap by systematically documenting and classifying repricers, ranging from basic fixed-rule algorithms to sophisticated self-learning AI algorithms. Drawing on suppliers’ descriptions, we analyze product features, fees, and associated services. Although the analysis is descriptive, we offer a first, broad overview of this new industry, potentially affecting millions of consumers in online marketplaces. Our focus is on describing the technical feature claims of these products where they are relevant for economic analysis in academic research and policy.
Algorithms in the Marketplace: An Empirical Analysis of Automated Pricing in E-Commerce
with Geza Sapi and Marcel Wieting. Information Economics and Policy, Volume 69, December 2024, 101111. https://doi.org/10.1016/j.infoecopol.2024.101111
Abstract: We analyze algorithmic pricing on the largest online marketplace in the Netherlands and Belgium. Based on two months of pricing data for around 2800 products, we find no significant correlation between the use of algorithms and an increase in prices of the Buy Box (the most prominently displayed offer for a product). We document that the presence of an algorithmic seller in monopoly markets goes hand-in-hand with lower prices. This effect is likely due to algorithms correcting excessively high human-set prices. We describe several characteristic algorithmic pricing patterns. While some of these pricing patterns are consistent with algorithmic collusion, such practice appears to be a fringe phenomenon. Overall, our findings call for careful policy with respect to pricing algorithms that remains alert to the possibility of algorithmic collusion but recognizes that pricing algorithms may benefit consumers. The latest pre-print version is available on SSRN.
Collusion by Pricing Algorithms in Competition Law and Economics (forthcoming in a handbook on competition enforcement in digital markets)
with Niccolò Galli. Robert Schuman Centre for Advanced Studies Research Paper No. 2024_06.
Abstract: Software programs based on algorithms have become common in pricing because they outperform humans at automatising tasks in terms of speed, complexity, and accuracy of analysis. In many online markets, repricing algorithms have replaced the human decision-maker. As with any other technology employed in the market, repricing algorithms empower human activity toward both positive and negative consequences. Their properties enable market transparency and efficiencies but also entail collusion risks beyond traditional oligopolies. This paper analyses why repricing algorithms can facilitate anti-competitive coordination and what is the scope for Art. 101(1) TFEU to tackle it. Acknowledging the limitations of EU competition law against collusion by autonomous algorithms, we qualify the antitrust concern through the economics and computer science understanding of pricing algorithms. Algorithmic pricing does not always lead to higher prices, although even simple algorithms can learn complex reward-punishment schemes that resemble collusive pricing strategies. The latest pre-print version is available on SSRN.
Customer recognition and mobile geo-targeting
with Irina Baye, Tim Reiz, and Geza Sapi. Review of Industrial Organization (2024). https://doi.org/10.1007/s11151-024-09952-2
Abstract: We consider competing mobile marketers that complement geo-targeting with behavior-based pricing and send personalized offers to customers. Firms observe consumers’ locations and can infer their (heterogeneous) responsiveness to discounts from purchase histories. The overall profit effect of behavioral targeting is driven by firms’ discount factor and consumers’ transport cost and can be neutral, positive, or negative. We are the first to show that the profitability of behavioral data may depend on firms’ time preferences. We derive conditions for when firms prefer more rather than less behavioral targeting.
Working paper: “Internet infrastructure and competition in digital markets” (under review)
Abstract: Large digital platform companies increasingly integrate vertically by building Internet infrastructure. These proprietary infrastructures confer quality advantages in markets for digital services. I model investment incentives for an infrastructure firm and a vertically-integrated firm facing a rival digital services firm without proprietary infrastructure. Small changes in the marginal cost of investment lead to a discontinuous jump in investment incentives both for the infrastructure firm and the vertically-integrated firm if the latter has more infrastructure than the former. The infrastructure firm benefits from “commoditization” when its infrastructure is smaller. I derive conditions under which the resulting increase in investment is socially efficient. As the market share of the rival firm decreases, a trade-off arises between efficiency and “contestability”, a key objective in European competition policy for digital markets. First published October 30, 2022. Current date see first page of the paper. The latest pre-print version is available on SSRN.
“The home bias in procurement. Cross-border procurement of medical supplies under Covid-19”
International Journal of Industrial Organization: CRESSE special edition 2023; Volume 89, Published: 23 June 2023, https://doi.org/10.1016/j.ijindorg.2023.102976
Abstract: Public procurement markets are often national a general agreement national preferencing. I exploit shocks occurring during the Covid-19 pandemic to two important factors, crisis urgency, measured through local infection rates, and increased buyer discretion, to study home bias in public procurement. Two causal difference-in-difference analyses on novel data for medical supplies in Europe show that home bias is not inevitable. An increase in local infection rates by one standard deviation locally increases the share of cross-border procurement by 19.3 percentage points over a baseline of 1.5 percent. Also, deregulation that allowed for buyer discretion caused cross-border procurement to increase by more than 35 percentage points. A simple theoretical model systematizes these findings. Download from this Github repository
“Analyzing exclusive dealing in two-sided markets: marketplaces for videogames”
Journal of European Competition Law & Practice, 2023; lpad018, Published: 26 May 2023, https://doi-org.eui.idm.oclc.org/10.1093/jeclap/lpad018
Exclusive dealing (ED) is controversial among regulators and may sometimes require economic analysis. Epic’s entry into online video game distribution shows that ED is an important part of an entrant’s strategy in a two-sided marketplace. Using a simple model and structural estimation, I use sparse data sources to estimate tradeoffs for consumer welfare. I estimate that market entry by Epic Games Store was unprofitable but that it has increased consumer welfare. When network effects are particularly high, we should expect more aggressive entry strategies (through subsidies and ED) but also lower consumer welfare from market fragmentation. a pre-print version is available on this website
Working paper: “The European Internal Energy Market’s Worth to the UK”
with Farid Gasmi. TSE Working Paper, n° 19-1052, 11/2019.
Abstract: This article proposes a two-country model of electricity trade under peak-load pricing. We apply the model to France and the UK to assess the benefit to the UK of trade within the European internal energy market (IEM). Calibration and simulations of the model aimed at simulating bilateral trade in the market coupling process at electricity exchanges show the following. First, the occurrence of gains from trade for both countries is highly dependent on whether imported electricity affects the price in the local market and whether imports alleviate scarcity. Second, the main effect of importing electricity is a shift in welfare from domestic producers to domestic consumers of the importing country. Finally, the UK’s membership in the IEM generates additional welfare for the UK of up to 900 M€ per year across a range of scenarios in which the number of on-peak periods are exogenously varied in a conservative way relative to the actual data. Download from UT Capitole
Dissertation
Modern markets: competition in the 21st century
https://cadmus.eui.eu/handle/1814/75898 Defence date: 25 September 2023; Examining Board: Prof. Giacomo Calzolari (European University Institute, supervisor); Prof. David Levine (European University Institute, co-supervisor); Dr. Justus Haucap (Düsseldorf Institute for Competition Economics (DICE)); Dr. Pierre Regibeau (European Commission) Full-text via DOI: doi.org/10.2870/787790
Abstract: This thesis is composed of three independent chapters, the third of which consists of two separate but thematically related papers. In Chapter 1, I introduce a theoretical model of vertical integration with a novel demand structure to investigate the effect of vertical integration into Internet infrastructure on competition in digital markets. I find that pure infrastructure providers have an incentive to accommodate vertically integrated firms by becoming “commoditized” suppliers of infrastructure. My model explains new trends in digital markets and has implications for competition policy, industrial policy and political economy. In Chapter 2, I estimate the effects of crisis intensity and deregulation on home bias in procurement. Using a novel data set on the award of procurement contracts for medical supplies during the first wave of the Covid-19 pandemic in Europe, I study the propensity to award contracts internationally. I document a unique shift towards international procurement, driven by local spikes in infection rates and deregulation. In Chapter 3, I study the role of pricing algorithms in online marketplaces. Its first part is a joint article with Giacomo Calzolari that describes the algorithmic repricing industry. Based on a novel sample of 130 repricing companies, we study the prices and claimed attributes of pricing algorithms. We find that turn-key algorithmic pricing services are widely available, and discuss product features, fees, and associated services. The second part of Chapter 3 is a literature review on algorithmic pricing. I summarize findings from the economics literature covering computational, experimental, and empirical methods as well as adjacent fields. I argue that a lack of understanding of buyer responses to algorithmic pricing cycles and endogenous adoption of algorithmic pricing are the main gaps in the literature.
Other publications
You can (try to) keep the economists out of the DMA but you cannot keep out the economics
with Magdalena Viktoria Kuyterink. Competition Policy International. 22.12.2022 Access at CPI (paywall).
The hidden layer: Does big tech’s control of internet infrastructure stifle competition in digital markets?
Competition Law Insight, 21.10.2022 Access at CLI (paywall).
Improving health resilience through better procurement of medical supplies : lessons from the COVID-19 Pandemic
Technical Report, STG Resilience Papers, 2021. The STG Resilience Paper is part of the Commission Research Report and Interim Progress Report (June 2021) published by Reform for Resilience. Download from Cadmus, the EUI Research Repository. Download from Reform for Resilience
The European Union’s Big Policy Bet Against the Tech Giants
with Nicolas Petit. Published on Promarket, the publication of the Stigler Center at the University of Chicago Booth School of Business, 02.11.2021. Read online
Unlocking the potential of AI : opportunities and challenges for European policy
with Marina Sanchez del Villar. Policy Briefs; 2021/16; Florence School of Regulation (Communications and Media). Download from Cadmus, the EUI Research Repository
Zur Weiterwälzung von Preisaufschlägen (On the Pass-On of Overcharges)
with Frank Maier-Rigaud and C.-Philipp Heller. Journal of German and European Competition Law (WuW, Wirtschaft und Wettbewerb), 69(11), 561-568 [in German]. Download from SSRN
Zur Weiterwälzung von Preisaufschlägen in regulierten Industrien (On the Pass-on of Overcharges in Regulated Industries)
with Frank Maier-Rigaud and C.-Philipp Heller. Neue Zeitschrift für Kartellrecht (NZKart), 12/2019, 650-658 [in German]. Download from SSRN