policymakers demonstrate

Competition and Regulation in Markets for Goods and Services 227
market participants and for welfare will tend to be mixed. Removing the ability
to price discriminate from the toolkit of firms, will tend to raise the price
for some buyers (or to prevent them from having access at all) and may reduce
social welfare, especially if it leads to a reduction in traded volume. This observation
is important and very relevant because if the objective of the Single Digital
Market currently pursued by the EC is viewed as a way to impose price
uniformity across all areas and market participants, the implications may not
be positive. Further, price discrimination may be a mechanism to ensure the
profit level required for the necessary initial investments to be made, thus in its
absence a market may not operate efficiently. Some of the competition cases
that are currently open in Europe, such as the cross border pay-TV cases, primarily
have such a ‘single market’ character. 51
5.6 Conclusion
Despite the important progress that has been made in academic research and
in competition policy itself, developments that modify the way that markets
work are calling for additional work and a modification of the approaches that
should be used. New issues, related to the size increase in the digital sectors of
the economy, and especially the way that digital technologies and e-commerce
practices revolutionize essentially all other sectors of the economy, imply some
new and important challenges for academics and policy-makers. Many of the
issues that surface as important in ‘digital markets’ are not absent in more traditional
markets. However, the systematic presence of some key new features
significantly modifies the nature of the models that should be used.
Overall, research on the topic has to achieve a delicate balance. On the
one hand, important central results from the existing industrial organization
research have to be used, even if reorganized, reinterpreted and understood
under some new light. On the other hand, the problems studied often call
for some completely new approaches, where the analysis should focus on the
strong economies of scale and scope, network effects and other features that
create nonconvexities in the models and imply that some assumptions underlying
parts of our standard analysis are not valid. Overall, competition becomes
more dynamic and often more discontinuous in nature than we currently recognize
in standard models and incorporate in our intuition when designing and
applying policy.
It would certainly be misguided to argue that the shift to digital markets
makes old results in economics research obsolete and that only a formalistic
approach to the application of competition policy could work well. Such
an approach would be especially wrong if it is accompanied by a tendency to
block innovative strategies employed by firms in their effort to be more competitive.
While these may not fall directly in the range that competition policy