Law, Economics, and Privacy: Implications of Government Policies on Website and Third-Party Information Sharing

Ram D. Gopal (), Hooman Hidaji (), Sule Nur Kutlu (), Raymond A. Patterson () and Niam Yaraghi ()
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Ram D. Gopal: Information Systems and Management, Warwick Business School, University of Warwick, Coventry CV4 7AL, United Kingdom
Hooman Hidaji: Haskayne School of Business, University of Calgary, Calgary, Alberta T2N 1N4, Canada
Sule Nur Kutlu: Haskayne School of Business, University of Calgary, Calgary, Alberta T2N 1N4, Canada
Raymond A. Patterson: Haskayne School of Business, University of Calgary, Calgary, Alberta T2N 1N4, Canada
Niam Yaraghi: Business Technology, Miami Herbert Business School, University of Miami, Coral Gables, Florida 33146

Information Systems Research, 2023, vol. 34, issue 4, 1375-1397

Abstract: Widespread abuse of internet users’ privacy online has prompted user advocacy groups to implore governments to intervene and protect consumer rights. To study such interventions’ effects, we examine data-protection policies that policy makers and governments can enforce on websites, including consent-based user information sharing and subsidizing competing websites. We use a stylized analytical model to examine such policies’ impact on the decisions and outcomes of websites, users, and third-parties. Interestingly, we find that even though a consent-based policy may improve user surplus, in the absence of market entry and exit (static market), it has the unintended consequence of increasing the number of third-parties and, thus, sharing of user information. We also determine that both consent-based and website subsidization policies may reduce competition by driving websites out of the market—to the detriment of user surplus and social welfare. To validate our analytical model’s findings, we empirically investigated the impact of a consent-based policy on third-parties in a natural experiment of the California Consumer Privacy Act. These findings raise significant implications for policy making surrounding online privacy.

Keywords: data protection regulation; government policy; website and third-party information sharing; online privacy (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:orisre:v:34:y:2023:i:4:p:1375-1397

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