Data Markets with Privacy-Conscious Consumers

Rossella Argenziano and Alessandro Bonatti

AEA Papers and Proceedings, 2023, vol. 113, 191-96

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 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.

JEL-codes: C73 D11 D21 D84 D91 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1257/pandp.20231083

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