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Privacy and platform competition

Philipp D. Dimakopoulos and Slobodan Sudaric

International Journal of Industrial Organization, 2018, vol. 61, issue C, 686-713

Abstract: We analyze platform competition where user data is collected to improve ad-targeting. Considering that users incur privacy costs, we show that the equilibrium level of data provision is distorted and can be inefficiently high or low: if overall competition is weak or if targeting benefits are low, too much private data is collected, and vice-versa. Further, we find that softer competition on either market side leads to more data collection, which implies substitutability between competition policy measures on both market sides. Moreover, if platforms engage in two-sided pricing, data provision is efficient.

Keywords: Privacy; Platform competition; User data; Ad targeting (search for similar items in EconPapers)
JEL-codes: D43 L13 L40 L86 (search for similar items in EconPapers)
Date: 2018
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