Regulating Privacy Policies on Digital Platforms

Michele Bisceglia, Alessandro Bonatti and Fiona Scott Morton
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Michele Bisceglia: Center for Algorithms, Data, and Market Design at Yale (CADMY)
Alessandro Bonatti: MIT Sloan School of Management
Fiona Scott Morton: Yale School of Management

No 2474, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: We study how privacy regulation affects menu pricing by a monopolist platform that collects and monetizes personal data. Consumers differ in privacy valuation and sophistication: naive users ignore privacy losses, while sophisticated users internalize them. The platform designs prices and data collection options to screen users. Without regulation, privacy allocations are distorted and naive users are exploited. Regulation through privacy-protecting defaults can create a market for information by inducing payments for data; hard caps on data collection protect naive users but may restrict efficient data trade.

Pages: 57 pages
Date: 2025-11-14
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