The Value of Personal Data in Internet Commerce: A High-Stakes Field Experiment on Data Regulation Policy

Tianshu Sun (), Zhe Yuan (), Chunxiao Li (), Kaifu Zhang () and Jun Xu ()
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Tianshu Sun: Cheung Kong Graduate School of Business, Beijing 100006, China; Department of Data Sciences and Operations, Marshall School of Business, University of Southern California, Los Angeles, California 90089
Zhe Yuan: School of Economics, Future Regional Development Laboratory and Center for Research of Private Economy, Zhejiang University, Hangzhou 310058, China
Chunxiao Li: Alibaba Group, Hangzhou 311121, China
Kaifu Zhang: Alibaba Group, Hangzhou 311121, China
Jun Xu: Alibaba Group, Hangzhou 311121, China

Management Science, 2024, vol. 70, issue 4, 2645-2660

Abstract: Personal data have become a key input in internet commerce, facilitating the matching between millions of customers and merchants. Recent data regulations in China, Europe, and the United States restrict internet platforms’ ability to collect and use personal data for personalized recommendation and may fundamentally impact internet commerce. In collaboration with the largest e-commerce platform in China, we conduct a large-scale field experiment to measure the potential impact of data regulation policy and to understand the value of personal data in internet commerce. For a random subset of 555,800 customers on the Alibaba platform, we simulate the regulation by banning the use of personal data in the home page recommendation algorithm and record the matching process and outcomes between these customers and merchants. Compared with the control group with personal data, we observe a significantly higher concentration in the algorithmic recommendation of products in the treatment group and a very sharp decrease in the matching outcomes as measured by both customer engagement (click-through rate and product browsing) and market transaction (sales volume and amount). The negative effect is disproportionate and more pronounced for niche merchants and customers who would benefit more from e-commerce. We discuss the potential economic impact of data regulation on internet commerce as well as the role of personal data in generating value and fostering long-tail innovations.

Keywords: field experiments; personal data; e-commerce; privacy; data regulation (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:70:y:2024:i:4:p:2645-2660

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