Big Data, Price Discrimination, and Antitrust

Antitrust guarantees a particular distribution of wealth between consumers and producers. Big data allows firms with pricing power to identify the highest price a consumer is willing to pay for a good and charge it to her. The practice is efficient because it allows firms to avoid pricing anyone out of the market, but it also upends the current distribution of wealth by allowing firms to charge the highest possible prices to everyone. Current antitrust rules cannot respond because they proscribe the formation, but not the exercise, of pricing power. Two options realize efficiency gains from price discrimination while preserving the current distribution of wealth. One is deconcentration of U.S. industry. The other is recognizing in the Federal Trade Commission a general power to use big data to set prices.