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Privacy and Platform Competition

Philipp Dimakopoulos () and Slobodan Sudaric ()
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Philipp Dimakopoulos: Humboldt-Universität zu Berlin
Slobodan Sudaric: Humboldt-Universität zu Berlin

No 2017003, Working Papers from Berlin Doctoral Program in Economics and Management Science (BDPEMS)

Abstract: We analyze platform competition where user data is collected to improve adtargeting. 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 effects on both market sides. Moreover, if platforms engage in two-sided pricing, data provision would be efficient.

Keywords: platform competition; user data; nuisance costs; ad targeting; privacy (search for similar items in EconPapers)
JEL-codes: D43 L13 L40 L86 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-ind, nep-mic and nep-pay
Date: 2017-08-07
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