Robert Somogyi’s OTKA young researcher (FK_22) project is titled ‘Pricing and regulation in the digital economy’. The main goal of this research project is the analysis of pricing practices in the digital world. The Internet is playing an ever more important role in our lives. In this research project, we investigate hidden fees on online price-comparison websites on the one hand, and the social welfare effects of the special market structure of some online platforms on the other hand. The importance of the first topic lies in the fact that many online platforms use hidden fees, which can reduce consumer welfare in the presence of naive consumers. In addition, we find in our preliminary results that the presence of online platforms makes shrouding incentives stronger. Therefore competition authorities worried about hidden fees should be especially worried about the presence of online intermediaries. The importance of the second topic was highlighted for example by the public debate about Facebook switching off news content by Australian news websites for a few days in February 2021. Through a series of research papers, we first aim to understand price-setting in digital markets, and second, we aim to compare different policy interventions to protect consumers when needed in these markets.
Robert Somogyi will present his paper on August 28 at the 48th EARIE Annual Conference, organized by NHH (Norwegian School of Economics).
Robert Somogyi will present his paper at the Oligo Workshop 2021, organized by Maastricht University, held virtually on June 4 and 5.
Robert Somogyi will present his paper at the 14th Digital Economics conference of the Toulouse School of Economics, held online on January 7th.
The paper “Prioritization vs zero-rating: Discrimination on the internet” by Robert Somogyi (joint with Axel Gautier) has been published recently in the International Journal of Industrial Organization.
Click here for free access to the article until Nov 15th.
The authors compare two business practices on the mobile internet market, paid prioritization and zero-rating. These practices are tools for the internet service provider (ISP) to alter competition on the content market. Both violate the principle of net neutrality, but the paper shows that their effects on consumer welfare are fairly different. In particular, it finds that a policy banning prioritization (a policy currently followed by the EU and also the US until 2016) can lead to zero-rating (if allowed) and a reduction in consumer surplus. Finally, the paper also shows that despite the fears of net neutrality advocates about excluding lawful content, the ISP can extract more surplus from consumers by privileging the relatively weaker content, at least when asymmetry between content types is limited.
The project investigates online platforms’ incentives to educate consumers about hidden prices that sellers may try charging them. When will Skyscanner or Google Flights warn consumers about large additional luggage fees? What are the incentives of Amazon and eBay to show shipping fees or VAT in the initial search results? The first draft of the paper analyzing these issues will be available in the Fall as a NET Institute Working Paper.
The NET Institute funds a number of scientific research projects in the area of network industries, including wired and wireless networks, “virtual networks,” electronic commerce, telecommunications, the Internet, platforms, and two-sided markets. It is expected that funded research will eventually be published in top academic research journals. The NET Institute’s board of directors consists of
- Dr. Vinton G. Cerf, Vice President & Chief Internet Evangelist, Google
- Professor Nicholas Economides, Stern School of Business, New York University (Executive Director)
- David A. Heiner,Vice President & Deputy General Counsel, Microsoft Corporation
- Dr. Nathan Myhrvold, CEO, Intellectual Ventures
- Professor Ariel Pakes, Economics Department, Harvard University.