Artificial intelligence (AI) and algorithms play a key role in digital markets. An increasing number of companies are using algorithms to improve pricing models or to optimise service offerings.
The combination of these technologically advanced tools poses new challenges for competition policy and economics. Legislators and competition authorities around the world are responding to these challenges: new laws are being passed to stop possible anti-competitive practices and/or harm.
In particular, the increasing use of pricing algorithms is fuelling the concern of antitrust authorities. Algorithms allow that pricing actions of companies are becoming indepently: without the need for explicit communication or explicit interaction. Next to this, tacit collusion becomes more likely through the use of algorithms, which can lead to higher price levels in the market too. The difference between anti-competitive collusion and pro-competitive actions is more difficult to determine in digital markets.
EE&MC has developed empirical tools to measure the impact of algorithms on the actual price level and on the degree of competition. The application of these tools is necessary when investigating whether companies are abusing their market position in digital markets.