Sandro Shelegia (Pompeu Fabra University) has obtained an ERC Consolidator Grant 2021. His project FAPoD (Foundations for Antitrust and Policy on Digital Platforms) will study competition in digital platform markets.

Sandro was born in Tbilisi, Georgia in 1980. After studying at the prestigious Komarovi physics-mathematics high school, he did a bachelor’s in business administration and applied mathematics. In 2001, he moved to Budapest to study economics at the Central European University, after which he moved to Universitat Pompeu Fabra to do his PhD in Economics. His first job was at the University of Vienna, where he worked until moving back to Universitat Pompeu Fabra as an associate professor. His primary research field is Industrial Organization, where he has worked extensively on consumers search models, vertical relations and economics of platforms. He is a research fellow at the Centre for Economic Policy Research (CEPR) and a co-editor at the International Journal of Industrial Organization (IJIO).

Which are the main objectives of FAPoD?

Internet markets tend to concentrate in the hands of a very few large platforms. These platforms have been accused of abusing their monopoly power vis-a-vis their users (consumers, sellers, advertisers) and maintaining the latter through hostile behaviour towards potential competitors. They are said to harm users by ‘self-preferencing’, data harvesting, creating ‘monopoly positions’ and extracting resulting rents with high fees, all the while avoiding competition by acquiring, copying and otherwise disadvantaging potential competitors.

This project addresses these concerns in four parts. Part 1 focuses on the dual role of online marketplaces, whereby the platform both runs the marketplace and acts as a seller on it. The project aims to understand how such hybrid marketplaces conduct themselves toward consumers and third-party sellers. The model will be used to evaluate recent policy proposals and suggest ways to avoid significant unintended consequences. Part 2 studies how platforms steer consumers to sellers. As most platforms let sellers set prices and collect fees on revenues, a platform’s own algorithm and its choice to augment/replace it with a position auction may be consequently driven by revenue maximization. The project plans to show that steering systems may drastically alter pricing, leading to ‘mediated’ competition. Part 3 explores the nature of recommendation algorithms, particularly the interplay between consumer search and algorithm effectiveness. The researcher demonstrates that algorithms may be self-fulfilling and self-defeating, which determines their effectiveness and significantly alters the resulting allocations and their efficiency. Part 4 explains the circumstances in which an incumbent platform may acquire an upstart platform. These depend on the overlap of existing user bases, increasing returns to data and monopoly power over advertisers. Acquisitions may be used in situations of both no and substantial overlap in user bases, with mixed welfare consequences.

Why did you decide to carry out your research at Pompeu Fabra University?

I have been at UPF since 2015. It is one of the best economics departments in Europe and a well-known department worldwide. The department has an excellent research environment. In addition, I’m able to teach at the Barcelona School of Economics where many bright students from all over the world come for graduate and postgraduate studies.

How do you expect this grant will affect your professional career?

Obtaining an ERC grant is a major achievement. It will allow me to form a small research group that will help me complete the ambitious projects I have set out in the winning proposal.

Are you planning to open research positions in your group?

Yes, within the project I plan to hire two postdoctoral researchers as well as two PhD students. They will be able to conduct their independent research on issues related to the proposal, as well as collaborate within my projects.

Are you planning any collaborations?

The proposal includes projects with foreign-based researchers. In Part 1 I plan to collaborate with Dr Andres Hervas-Drane from City, University of London Bayes Business School. In Part 2 I will collaborate with Prof Heski Bar-Isaac from Rotman School of Management, University of Toronto. In Part 4 I collaborate with my colleague Prof Massimo Motta.  I plan to expand international collaborations as the project progresses.

Where can we learn more about you and your project?

Website: www.sandroshelegia.com

Selected publications

Beliefs and Consumer Search in a Vertical Industry, Maarten Janssen and Sandro Shelegia, Journal of the European Economic Association, 18(5), 2359–2393 (2020)

Consumer Search with Observational Learning, joint with Daniel Garcia and Sandro Shelegia, RAND Journal of Economics, 49(1), 224-253 (2018)

During the following weeks, we will be presenting those researchers working at Spanish institutions that have obtained an ERC Starting or Consolidator Grant 2021 and their projects. You can check their profiles HERE.