The Bright Side of the GDPR: Welfare-Improving Privacy Management

Chongwoo Choe (), Noriaki Matsushima and Shiva Shekhar ()
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Chongwoo Choe: Department of Economics, Monash University, Clayton, Victoria 3800, Australia
Shiva Shekhar: Tilburg School of Economics and Management, Tilburg University, 5037 AB Tilburg, Netherlands

Management Science, 2025, vol. 71, issue 8, 6836-6858

Abstract: We study the General Data Protection Regulation (GDPR)’s opt-in requirement in a model with a firm that provides a digital service and consumers who are heterogeneous in their valuations of the firm’s service and the privacy costs incurred when sharing personal data with the firm. We show that the GDPR boosts demand for the service by allowing consumers with high privacy costs to buy the service without sharing data. The increased demand leads to a higher price but a smaller quantity of shared data. If the firm’s revenue is largely usage based rather than data based, then both the firm’s profit and consumer surplus increase after the GDPR, implying that the GDPR can be welfare improving. But if the firm’s revenue is largely from data monetization, then the GDPR can reduce the firm’s profit and consumer surplus.

Keywords: GDPR; opt-in; opt-out; privacy management; welfare (search for similar items in EconPapers)
Date: 2025
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http://dx.doi.org/10.1287/mnsc.2024.06653 (application/pdf)

Related works:
Working Paper: The bright side of the GDPR: Welfare-improving privacy management (2024)
Working Paper: The Bright Side of the GDPR: Welfare-Improving Privacy Management (2023)
Working Paper: The Bright Side of the GDPR: Welfare-improving Privacy Management (2023)
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