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Privacy Regulation and Quality Investment

Yassine Lefouili and Ying Lei Toh

No RWP 19-5, Research Working Paper from Federal Reserve Bank of Kansas City

Abstract: This paper analyzes whether a privacy regulation that restricts a dominant firm?s data disclosure level harms the firm?s incentives to invest in service quality and thereby harms social welfare. We study how the regulation affects the privacy and quality choices of a monopoly service provider, who derives revenues solely from disclosing user data to third parties, as well as how those choices in turn affect consumers? participation and information-sharing decisions. We show that the regulation does not always harm investment incentives; moreover, even when it does, it may still improve social welfare.

Keywords: Privacy Regulation; Data Disclosure; Investment; Quality (search for similar items in EconPapers)
JEL-codes: D83 L15 L51 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2019-07-30
New Economics Papers: this item is included in nep-com, nep-law, nep-mic and nep-reg
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DOI: 10.18651/RWP2019-05

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