The brave new world of digital personal assistants: benefits and challenges from an economic perspective

The paper applies modern industrial economic theories to give an overview of the emerging phenomenon of digital personal assistants (DPAs). A DPA is an automated system that serves personal usage only and interacts with the user in natural language, meanwhile applying original and third-party services to obtain information and perform various actions. We analyze the economic benefits of increasing usage of DPAs, such as reduction of transaction costs, procompetitive effects, and boosting the e-commerce economy. Besides benefits, however, adopting DPA in life may also contain some risks and downsides, which may reduce the positive welfare effects or even lead to decreasing welfare: biased services, market power on the DPA market and economic dependence on a dominant DPA, potential leveraging of DPA suppliers’ market power into neighboring markets, personalized data (ab)use and privacy, media bias and manipulation of public opinion, and loss of autonomy. We identify the degree of effective competition and the degree of rationality of consumer behavior as the most relevant factors for either the advantages or the disadvantages to prevail and derive first regulatory implications.