policymakers demonstrate

5 Competition and Regulation in Markets for
Goods and Services: A Survey with Emphasis
on Digital Markets
Nikolaos Vettas
Abstract
In the last couple of decades, competition policy has been receiving increasing
attention and has obtained a central role in microeconomic policy in Europe.
Ensuring that markets work as competitively as possible is viewed as key for
economic growth and welfare. While much progress has been made in the
research that studies and shapes competition policy, the nature of competition in
markets is also evolving and new issues are emerging. An important novel feature
is related to the increase in the size of the digital sectors of the economy and
especially to the way that digital technologies and e-commerce practices revolutionize
essentially all other sectors of the economy. These developments represent
some new challenges for research. One key issue is that with digital markets
and technologies we are more likely to have intense competition ‘for the
market’, rather than competition ‘in the market’. It follows that we need models
that are more dynamic and incorporate to a larger extent network effects, other
increasing returns to scale and uncertainty. At the same time, it is important that
one does not ignore the lessons of the earlier and current literature, especially
in core areas like pricing and vertical relations. On the empirical research side,
the availability of relevant data can be expected to increase exponentially, due
to the fact that electronic transactions can be recorded almost automatically.
The need and opportunity for new empirical studies, given the nature of available
data, thus emerges. New technologies also tend to minimize the distances
between buyers and sellers in markets and facilitate information flows; ‘single
market’issues therefore come to the forefront and their analysis can be controversial.
This challenge becomes a clear priority since the Digital Single Market
is a stated objective of the European Commission.
5.1 Introduction
Competition and innovation can be identified as the two, closely interrelated,
pillars of long-run growth. Over the last decades, in particular, economic policy
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