Overcoming methodological challenges in the application of competition law to digital platforms—a Swedish perspective

Iacovides, Marios C.; Jeanrond, Jakob

doi:10.1093/jaenfo/jny005

Cited by 6 publications

(3 citation statements)

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“…Firstly, it is straightforwardly calculated by multiplying the price of a stock by its total number of outstanding shares. Using market capitalization thus represents an improvement in the quality of data over the problematic market share and sales (Caves & Porter 1978;Nawrocki & Carter 2010;Krivka 2016;Iacovides & Jeanrond 2018). Secondly, market capitalization is synonymous with stock price, which reflects the market's assessment of a company's current and future earnings potential.…”

Section: Measuring Financial Performance Through Malthusian Fitness I...mentioning

confidence: 99%

Fluctuating selection at work: Estimating the firms’ fitnesses from time series of their market caps and forecasting their future shares

Fort

2023

Preprint

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Evolutionary economics has been useful to explain the nature of the processes of innovation, as well as providing useful heuristics for applied research. However, quantitative tests are rare and in general fail to capture the observed dynamics of firms in real markets. A main problem is how to estimate the fitnesses of companies. We present a quantitative implementation of fluctuating selection to explain and forecast the dynamics of firms’ market capitalizations (MC). We start by proposing a recipe to estimate the financial fitness of a company from its MC time series, which is completely analogous to the Malthusian fitness of evolutionary biology. Using Malthusian fitnesses in terms of MC implies that all companies, through their stocks, irrespective of their industry or sector, are competing for investors’ money. These fitnesses, in turn, allow to forecast the companies’ proportions of total MC through a natural selection equation. We validate the method using the daily MC of public-owned Fortune 100 companies across 2000–2021. This Fluctuating Selection from Market Capitalization (FSMC) formula is particularly accurate in forecasting the MC proportions of companies. It outperforms the geometric random walk stochastic benchmark for all forecasting instances across validation periods ranging from a month to a year. JEL codes: B52, C51, C52, C53, C63, G17

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Section: Measuring Financial Performance Through Malthusian Fitness I...mentioning

confidence: 99%

Fluctuating selection at work: Estimating the firms’ fitnesses from time series of their market caps and forecasting their future shares

Fort

2023

Preprint

View full text Add to dashboard Cite

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“…Simplicity: Market capitalization can be straightforwardly calculated as the product of the stock's market price times the total number of outstanding shares of the company. Thus, using market capitalization often represents an improvement in the quality of data over other metrics, like market share and sales (Nawrocki & Carter 2010;Iacovides & Jeanrond 2018).…”

Section: Financial Performance: Malthusian Fitness In Terms Of Market...mentioning

confidence: 99%

How important is natural selection respect to environment change in driving financial markets?

Fort

2023

Preprint

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A central challenge in evolutionary economics stems from the fact that fitness values are not static quantities but typically fluctuate over time. Based on the longstanding tradition of rigorous mathematical description of evolution in population genetics, we propose a quantitative implementation of fluctuating selection to explain the dynamics of firms’ market capitalizations. We thus estimate the Malthusian fitness of a company from a time series of its market cap. Next, the Fisher/Price theorem allows us to decompose the time variation of mean fitness into a “selection” term and an “environment change” term. The latter encompasses all time changes of fitnesses (due to innovation of firms, changes in economic policy, etc.) We apply this Fluctuating Selection from Market Caps (FSMC) approach to daily market capitalizations of public-owned Fortune 100 companies across 2000-2021. The main findings are: Firstly, most of the change in mean fitness is explained by the environment change. Secondly, the smaller effect of selection has been mainly circumscribed to the three recessions that occurred between 2000 and 2021. Thirdly, recessions were characterized by drops in mean fitness. We conclude by deriving an equation for the evolution of market concentration that explains the observed trend towards greater concentration. JEL codes: B52, C51, C52, C53, C63, G17

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“…For example, Karanović et al (2020) highlight the regulatory dilemmas that follow from this. Therefore, adopting a digital platform commits service providers to an open business strategy, in which transactions with customers now hinge on transparent and commoditized transactions through an open rather than closed market presence, often limiting the ability of service providers to customize their offering and pricing outside of the terms and conditions set by the platform owner (Iacovides and Jenarond, 2018).…”

Section: Theoretical Backgroundmentioning

confidence: 99%

Same Old Song with a Different Melody: The Paradox of Market Reach and Financial Performance on Digital Platforms

Hänninen

Smedlund

2021

J Management Studies

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In the service sector, digital platforms now enable service providers to reach customers through an online marketplace and use the value‐adding complementary services offered. However, despite the widespread prevalence of digital platforms, there has been little research on the market reach and financial performance captured by service providers. We explored these service provider‐specific outcomes of digital platforms by studying a digital platform in the beauty industry. Our results show that digital platforms present a troubling paradox for service providers participating in a platform‐based online marketplace: despite increases in market reach, in terms of a higher rate of new customer acquisition, those service providers participating in the marketplace have lower sales than others. However, the ‘dark side’ of this paradox is compensated by higher sales for service providers using more of the complementary services offered by the platform. Hence, although digital platforms may open new markets and add value, service providers should be wary of their paradoxical consequences. With these findings, we contribute new theoretical and managerial insight about the service provider‐specific outcomes of digital platforms and add to the ongoing debate about firm strategies in the digital age concerning the platform economy.

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Overcoming methodological challenges in the application of competition law to digital platforms—a Swedish perspective

Cited by 6 publications

References 0 publications

Fluctuating selection at work: Estimating the firms’ fitnesses from time series of their market caps and forecasting their future shares

Fluctuating selection at work: Estimating the firms’ fitnesses from time series of their market caps and forecasting their future shares

How important is natural selection respect to environment change in driving financial markets?

Same Old Song with a Different Melody: The Paradox of Market Reach and Financial Performance on Digital Platforms

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