On the Private and Social Value of Consumer Data in Vertically-Integrated Platform Markets

Jorge Padilla, Salvatore Piccolo (salvapiccolo@gmail.com) and Helder Vasconcelos
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Jorge Padilla: Compass Lexecon

CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy

Abstract: We characterize and compare the private and social incentives to collect consumer data by a vertically-integrated online intermediary who competes with third-party sellers listed on its platform and is required by regulation to share with rivals all the information it gathers. With linear intermediation fees and price competition, the intermediary over-invests in accuracy compared to the social optimum when the intra-platform competition is sufficiently weak and when demand is not too responsive to quality. By contrast, the intermediary tends to under-invest in accuracy when the intra-platform competition is strong enough, and demand is sufficiently responsive to quality. With quantity competition, the intermediary always over-invests in accuracy. Importantly, when consumers exhibit privacy concerns, the over-investment problem worsens, whereas the under-investment problem mitigates. We also investigate the impact of alternative (non-linear) contractual arrangements.

Keywords: Consumer Data; Competition; Information Accuracy; Platforms; Privacy; Value of Information; Vertical Integration. (search for similar items in EconPapers)
JEL-codes: D47 D85 L5 L81 M3 (search for similar items in EconPapers)
Date: 2020-10-11
New Economics Papers: this item is included in nep-com, nep-cta, nep-mic and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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