Discuss the important features that are needed to formulate a comprehensive policy in
India that accounts for the distinctive characteristics of digital markets. (200 Words)
Refer - Business Line
Enrich the answer from other sources, if the question demands.
IAS Parliament 5 years
KEY POINTS
The difficulty our laws face in coping with digital markets is a matter of concern. Such difficulty stems from the contrast between digital markets and traditional markets that most laws, including competition law, centre their understanding on.
Platform-based markets:
· In these markets an intermediary provides a technological foundation connecting other parties such as buyers, sellers or advertisers.
· A unique feature is that the platform plays an infrastructural role which third parties transact upon. This results in the entrustment of inordinate power upon the platform, often making it indispensable for those operating upon it. Ex: MakeMyTrip case, stresses on the power of platforms to influence the visibility and discoverability of hotels.
Network effects:
· These exist where users derive increased utility from a good or service when the number of other users consuming the same good or service increases.
· For instance, increases in the user-base of a social network increase the possibility of connecting with other users, thereby enhancing its utility.
· Digital products often demonstrate strong network effects. Consequently, it is not enough for a new entrant to merely offer better quality and/or a lower price than the pre-existing ones, but it must also convince users of existing applications to migrate to its platform.
· The CCI, despite acknowledging the network effects operating in favour of taxi aggregators such as Ola and Uber, has not yet sustained a claim of dominance based on network effects by itself.
Return to scale:
· Economies of scale are the savings generated when the per-capita cost of production/delivery of a good/service decreases with an increase in the number produced/delivered.
· However, this phenomenon is amplified in the case of digital markets as every consumer of a digital good or service pays a price for the same without the seller incurring a significant marginal cost towards its provision.
· This return on investment in digital markets is therefore amplified far beyond traditional markets.
The need of the hour is to shun policy-making in silos and instead pursue a comprehensive policy which covers competition law, data protection law, information technology law as well as foreign investment and e-commerce policy.
Shivangi 5 years
Please review.thank you
IAS Parliament 5 years
Good answer. Keep Writing.
Vendhan 5 years
Tn ku
IAS Parliament 5 years
Try to include about the features which forms the core part of digital markets like plat form based markets, return of sale etc. Keep Writing.
