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Privacy in Markets

Paper Session

Saturday, Jan. 7, 2023 2:30 PM - 4:30 PM (CST)

Hilton Riverside, Royal
Hosted By: American Economic Association
  • Chair: Rakesh Vohra, University of Pennsylvania

Data Linkages and Privacy Regulation

Rossella Argenziano
,
University of Essex
Alessandro Bonatti
,
Massachusetts Institute of Technology

Abstract

We 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 collects data on consumer behavior; the other leverages the data to set a quality level and a price. A data linkage benefits the consumer in equilibrium when the recipient firm is sufficiently similar to the collecting firm. We then endogenize linkage formation under various forms of privacy regulation. We show that voluntary consent requirements benefit consumers in equilibrium but that bans on discriminatory prices and qualities harm consumers.

Competitive Markets for Personal Data

Simone Galperti
,
University of California-San Diego
Jacopo Perego
,
Columbia University

Abstract

Personal data is the ``new oil'' and fuels major debates about privacy. Yet, it is often not traded in formal markets, nor are individuals compensated for their data. This may prevent the digital economy from benefiting society at large. Key questions are: What is the value of an individual's data? How will privacy regulations affect it? We provide answers building on the approach developed by Galperti et al. (2021). One insight is that privacy protections not only shift wealth from data users (businesses) to data sources (people). They can also change the value itself of data, redistributing wealth across data sources.

Consumer Control and Privacy Policies

S. Nageeb Ali
,
Pennsylvania State University
Greg Lewis
,
Amazon
Shoshana Vasserman
,
Stanford University

Abstract

This paper describes the verifiable-disclosure approach to modeling consumer control of data. It highlights how rich forms of disclosure are necessary for consumer gains in monopolistic markets but simple forms of disclosure suffice in competitive markets. This approach also offers a partial answer to the “privacy paradox.”

Market Segmentation Through Information

Matthew Elliott
,
University of Cambridge
Andrea Galeotti
,
London Business School
Andrew Koh
,
Massachusetts Institute of Technology
Wenhao Li
,
Pennsylvania State University

Abstract

An information designer has precise information about consumers' preferences over products sold by oligopolists. The designer chooses what information to reveal to differentiated firms who, then, compete on price by making personalized offers. We ask what market outcomes the designer can achieve. The information designer is a metaphor for an internet platform who collects data about users and sells it to firms who can, in turn, target discounts and promotions towards different consumers. Our analysis provides new benchmarks demonstrating the power that users' data can endow internet platforms with. These benchmarks speak directly to current regulatory debates.

Discussant(s)
Jidong Zhou
,
Yale University
Nima Haghpanah
,
Pennsylvania State University
Steven Tadelis
,
University of California-Berkeley
Shoshana Vasserman
,
Stanford University
JEL Classifications
  • D4 - Market Structure, Pricing, and Design
  • L1 - Market Structure, Firm Strategy, and Market Performance