How to Assess Market Power in the Digital Economy?

In this thesis, I have examined whether the current approach to competition policy is suitable for the distinct characteristics of the digital economy. It is particularly difficult to define the relevant market and rely on market share test as a proxy for market power in the digital economy mainly because of its dynamic nature. As the market boundaries shift so rapidly in dynamic markets, having a static perspective when defining the relevant market might fall short when assessing competitive constraints that an undertaking may face in the near future. In this regard, this thesis calls for a change in the traditional assessment of market power, and it proposes to replace the relevant market/market share paradigm with a more economic effects-based method, such as estimating the elasticity of residual demand. By doing so, competition authorities can assess competitive constraints from a broader perspective without necessarily being limited to a particular relevant market or any formalistic structure. In order to identify the most suitable way to assess market power in the digital economy, this thesis is structured as follows. Chapter II explains what digital economy is, how it emerged, and what makes it different from the rest of the economy by identifying its distinguishing characteristics. After providing an overview of the digital economy, Chapter III gives more theoretical insight to the concept of market power. First, it explains the importance of market power within the social market economy. In the second part, it introduces various definitions of market power as provided by different institutions and scholars, describing the defining characteristics of these definitions afterwards. Having explained the concept of market power, Chapter IV focuses on how market power is assessed. By doing so, it explains not only the traditional indirect assessment of market power, but also the direct assessment of the latter. After clarifying what the digital economy is, as well as the concept of market power and how it is assessed, Chapter V evaluates the suitability of current understanding of market power in the digital economy. Then it explains what the challenges of assessing market power in the digital economy are when applying conventional techniques. In the light of these findings, it finally suggests a blueprint of how to assess market power in the digital economy. Lastly, Chapter VI provides the summary of findings and the final conclusion