Data-Driven Mergers

We study mergers between firms operating in data-connected markets: the data generated as a byproduct of the activity in market A can be used by firms operating in market B. The effects of such a merger depend on whether data trade among independent firms is possible and whether data use benefits consumers or leads to more surplus extraction. When data increases product B’s quality, the merger benefits consumers in both markets if data cannot be traded absent the merger and harms them otherwise. When data are used to extract consumer surplus in market B, the merger increases consumer surplus in market A and reduces it in market B. This paper was accepted by Joshua Gans, business strategy. Funding: This work was supported by Agence Nationale de la Recherche [Grant ANR-17-EURE-0010] (Investissements d’Avenir program) to A. de Cornière; Oxford Internet Institute’s Research Programme on AI, Government, and Policy, funded by the Dieter Schwarz Stiftung gGmbH to G. Taylor; and TSE Digital Center.