Data Markets with Privacy-Conscious Consumers
AbstractWe study data linkages among heterogeneous firms and examine how they shape the outcome of privacy regulation. A single consumer interacts sequentially with two firms: one firm collects data on consumer behavior, and the other firm leverages the data to set a quality level and a price. Privacy-conscious consumers distort their purchases from a data-collecting firm to manipulate the data-using firm's beliefs. We identify conditions under which data linkages increase total firm profits. Therefore, if firms can trade consumer data efficiently, our setting provides a rationale for the existence of data markets even with privacy-conscious consumers.
CitationArgenziano, Rossella, and Alessandro Bonatti. 2023. "Data Markets with Privacy-Conscious Consumers." AEA Papers and Proceedings, 113: 191-96. DOI: 10.1257/pandp.20231083
- C73 Stochastic and Dynamic Games; Evolutionary Games; Repeated Games
- D11 Consumer Economics: Theory
- D21 Firm Behavior: Theory
- D84 Expectations; Speculations
- D91 Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making