How Does Data Cause Network Effects - Algorithms’ Importance

Therefore, the predictive ability of the algorithm to the user’s specific search is more important. Rather than the need of more data, data-supported learning is the key factor that affects a company’s ability to use “relevant” data and “correct” algorithms. The research evidence suggests that the link between data and network effects is constrained by specific tactical actions and the ability of platform companies to use algorithms. An anti-competitive practice needs to consider that whether the differences in analytical capabilities persist and whether data-supported learning amplifies the differences, as to make some platforms more competitive.

It is an empirical question to calculate what the minimum threshold for data is and to what extent it creates barriers to market access. It must be assessed on a case-by-case basis. The answers to these open questions is related to the factors that need to be considered in data evaluation: which data is valuable, when it is valuable, and to whom is valuable.