Competing data intermediaries

Shota Ichihashi

RAND Journal of Economics, 2021, vol. 52, issue 3, 515-537

Abstract: I study a model of competition between data intermediaries, which collect personal data from consumers and sell them to downstream firms. Competition has a limited impact on benefiting consumers: If intermediaries offer high compensation for data, consumers share data with multiple intermediaries, which lowers the downstream price of data and hurts intermediaries. Anticipating this, intermediaries offer low compensation for data. Although consumers are exclusive suppliers of data, the nonrivalry of data can lead to concentration and high intermediary profits in data markets. In particular, if downstream firms use data to extract surplus from consumers, competing intermediaries sustain a monopoly outcome.

Date: 2021
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