Is Big Tech Destroying Retail Markets?

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To be sure, price discrimination will not happen for every good and service, and the trend could be tempered by competition from offline retailers or new entrants vying for market share by offering lower prices to everyone. Alternatively, the data collected in some industries could become so widely shared across competing firms that they will all converge on a single price for each individual. In fact, companies today are probably already facing this kind of price segmentation, especially those that have amassed a lot of public data.

This suggests that markets could potentially become extremely fragmented, such that consumers’ choices will be strictly limited to the offerings that have been selected according to their data profiles. As any student of economics understands, this kind of situation decreases overall welfare, because every consumer will be forced to pay the maximum of what they are willing to spend for each good or service they purchase, keeping nothing “extra” for themselves.

Making matters worse, rapidly rising capital and skill requirements for production, among other factors, is sustaining a trend toward less competition among companies across a wide range of sectors in advanced economies. This, together with the systematic “extraction” of consumer surplus, will have far-reaching macroeconomic implications, particularly through changes in private consumption patterns. For consumers, the slice of the economic pie made available by their disposable incomes will shrink in real terms, leading to a fall in aggregate demand. Thus, at the end of the day, there will be less for everyone.

Amid the ongoing debate about how the dominant tech firms should and should not be allowed to use personal data collected from users online, many of these firms have continued to decide these questions for themselves – and, by extension, for the rest of us, too. For the sake of social welfare in the years and decades ahead, we must ensure that these decisions are compatible with the creation and maintenance of healthy, competitive markets. After all, a system that benefits consumers benefits everyone.  project-syndicate

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A warsame

Published by A Warsame is senior Editor and managing Director of Mareeg Media Whatup :+447737886245
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