Chicago Booth’s Luigi Zingales and George Mason University’s Tyler Cowen discuss the market power wielded by digital platforms, and how to promote competition.
Google and Facebook have an effective duopoly on online advertising. For the average person, why is that a problem? Prices haven’t gone up. Why should we care?
Zingales: Most people don’t perceive that as a problem. The perceived price [for using Google or Facebook] is zero. It’s not really zero, because we are giving up our data in exchange. Google and Facebook’s market power in advertising increases the cost of advertising, which eventually will be reflected in the price of goods. In addition, Facebook and Google are in the media business, a very important business for our democracy. The risk of their dominance is the affect on our political system.
Cowen: Google and Facebook are great companies. They give consumers wonderful products for free. They actually give people who want to advertise a much lower price, a much better way of reaching users in a targeted manner, so they’ve very much lowered prices. They’re not monopolies. You can advertise on radio, on TV, in print media, online. They have a large market share because they’re doing a better job at a lower price. If you look at Google and Facebook as media, there’s never been a time in American history where you have more choices as to what to read, what kind of news to get, how many opinions, and how many commentators you can sample.
To read the full transcript, see the original post at Chicago Booth Review. For more on the potential monopoly power of Facebook, check out “Hail to the Chief of Facebook,” episode 1 of the Capitalisn’t podcast.
Disclaimer: The ProMarket blog is dedicated to discussing how competition tends to be subverted by special interests. The posts represent the opinions of their writers, not those of the University of Chicago, the Booth School of Business, or its faculty. For more information, please visit ProMarket Blog Policy.
