Privacy and platform competition
Philipp D. Dimakopoulos and
International Journal of Industrial Organization, 2018, vol. 61, issue C, 686-713
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)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:61:y:2018:i:c:p:686-713
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