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

Chongwoo Choe, Noriaki Matsushima and Shiva Shekhar ()
Additional contact information
Shiva Shekhar: The corresponding author. Tilburg School of Economics and Management (TiSEM), CESifo Research affiliate

No 2023-14, Monash Economics Working Papers from Monash University, Department of Economics

Abstract: We study the 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 as well as 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)
JEL-codes: D18 D61 K24 (search for similar items in EconPapers)
Date: 2023-10
New Economics Papers: this item is included in nep-mic, nep-pay and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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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)
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