Digital Economy Summer School

Course Overview

Artificial Intelligence (AI) algorithms are increasingly crowding our markets and, more broadly, shaping our societies. The impact of learning algorithms on competition in “digital” markets is an issue of great importance in policy circles and increasingly studied in academic work. 

This short course will bring students to the frontier of research on the Economics of Artificial Intelligence with particular emphasis on competition policy.  We will focus on some of the topics that will pose imminent and relevant challenges in this rapidly evolving area for economic research and policymakers.

This course is particularly suitable to advanced graduate students looking for a dissertation topic as well as practitioners seeking to catch up with state-of-the-art academic research on digital markets.

Course Outline

1. What is AI? Concepts and tools
2. Economics of AI: a helicopter tour:
   a) AI as a general purpose technology
   b) Effect of automation and the labor share
   c) AI and marketplaces
3. Competing and colluding pricing algorithms:
   a) Theoretical and experimental results
   b) Pricing algorithms in the wild
4. Shaping consumer choices: the economics of recommender systems
   a) Case study: Spotify playlists
5. Automating bidding in auctions
   a) Collusion
   b) Optimal Auction design
6. Algorithms and public policy
   a) The EU initiatives
   b) How can Economics inform the regulatory debate?
   c) Algorithmic discrimination 

About the Instructor

Emilio Calvano (PhD, Toulouse School of Economics, 2008) is a full professor of Economics at the University of Rome - Tor Vergata, associate faculty at the Toulouse School of Economics and research fellow of the Centre for Economic Policy Research in London (CEPR). He is an applied theoretical economist whose research mainly focuses on the theory of Industrial Organization.

He has published in top international peer-reviewed outlets such as Science Magazine, American Economic Review, Management Science, American Economic Journal: Microeconomics, Economic Journal and International Journal of Industrial Organization and is associate editor at the Journal of Industrial Economics.

His research interests include the economics of artificial intelligence, the economics of platforms, information economics and competition policy. His recent work studies the impact of AI powered algorithms (such as pricing software and recommender systems) on digital markets.

Course Overview

In a world where the digital revolution continues to reshape our economy, staying at the forefront of this dynamic landscape is no longer an option; it's a necessity.

We will explore the strategic behavior of these platforms and scrutinize the key policy actions governments implement. This exploration will be analyzed by using a combination of theoretical tools (e.g., basic microeconomics and game theory), alongside pertinent case studies, including but not limited to Amazon, Airbnb, Apple, Booking.com, Dotcolib, and Google. Furthermore, our analysis will extend to the ways in which the digital economy disrupts conventional business models while creating new business opportunities.

This course is particularly suitable for advanced graduate students with a solid background in economics as well as practitioners eager to align their insights with the latest academic research on platform strategies. 

At the end of the course, the participants will not only grasp the fundamental principles of platform pricing but also translate them into practical knowledge. They will have a keen understanding of emerging trends in this domain, enabling them to influence decision-making processes within their organizations and shape the policies that govern the digital economy. Moreover, the participants will master the art of evaluating both theoretical and empirical analyses and learn how to present their findings effectively to diverse audiences.

Course Outline

1. Platform Business Model and Pricing
   a) Business models of digital platforms
   b) Pricing in two-sided markets
   c) The importance of network externalities

2. Competition Policy Implications of Digital Platforms
   a) Abuse of dominant position: Microsoft, Intel, Amazon, and Google; Epic and Spotify versus Apple; EU against price parity clauses; regulatory interventions (fee caps).

3. Pricing and Non-pricing Strategies in the Sharing Economy
   a) The rise of the sharing economy and its transformation
   b)The cases of Uber, Blablacar, and Airbnb
    
4. New Challenges
   a) Cloud computing
   b) Telemedicine and precision medicine
   c) Data pooling and data sharing

References

Course slides and compulsory articles will be provided before the class in order for students to actively engage in class discussion. There is no compulsory textbook. However, a useful and freely downloadable book is:

• Ganuza, J.J. and G. Llober (2018) Economic Analysis of the Digital Revolution 

Available at: https://www.copenhageneconomics.com/dyn/resources/Filelibrary/file/2/172/1539951378/economic_analysis_of_the_digital_revolution.pdf

If you have a background in economics, and if you want to know more about the subject, the following textbook will provide you with the economics tools to formalize some of the concepts we cover in class.

• Belleflamme, P. and M. Peitz (2021). “The Economics of Platforms”, Cambridge University Press.

The following book provides instead an essential guide to understanding the strategies behind dominant platforms. It is suitable, especially for management students.

• Belleflamme, P. and N. Neysen (2023). “Platform Strategies: A Guidebook for Entrepreneurs in the Platform Economy”. Routledge.
• Parker, G., Van Alstyne, M. and S. Choudary (2017). “Platform Revolution: How Networked Markets AreTransforming the Economy--and How to Make Them Work for You”, W.W. NORTON & Company.

About the Instructor

Andrea Mantovani is an Associate Professor at the Toulouse Business School. He is also associate faculty at the Toulouse School of Economics. He received his PhD in Quantitative Economics from CORE, Université Catholique de Louvain. He held visiting positions at IESE Business School, Universitat Pompeu Fabra, Universidad Autonoma de Barcelona, Kellogg School of Management at Northwestern University, Université Pantheon-Assas Paris II, and Pontificia Universidad Catolica de Chile. 

His main research focus is on industrial economics, specifically in the areas of digital economy, managerial economics, competition policy and regulation. He has published in leading top journals such as Management Science, Strategy Science, Games and Economic Behavior, European Economic Review, International Journal of Industrial Organization, Journal of Economics & Management Strategy, and Journal of Economic Dynamics and Control, among others.  

He regularly teaches Operations Management, Digital Economy, Industrial Organization, International Economics, and Game Theory.