Macro Seminar - Laura Veldkamp (Columbia)

Abstract: How can we measure the extent to which data-intensive firms are using their market power?Economists typically look to markups as evidence of market power. Using a simple modelwith firms that price risk in their capital allocation and production decisions, we highlight thecompeting forces that make markups an unreliable measure of data-derived market power.Instead, we show how markups measured at different levels of aggregation reflect data anddistinguish data from other intangible investments. These findings both reconcile seeminglycontradictory empirical markup evidence and guide us to new ways of measuring data and itseffects on markets.

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