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Online privacy and market structure: Theory and evidence

Lorien Sabatino and Geza Sapi ()

No 308, DICE Discussion Papers from University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE)

Abstract: This paper investigates how privacy regulation affects the structure of online markets. We provide a simple theoretical model capturing the basic trade-off between the degree of privacy intrusion and the informativeness of advertising. We derive empirically testable hypotheses regarding a possibly asymmetric effect of privacy regulation on large and small firms using a diff-diff-diff model with heterogeneous treatment timing. Our theoretical model predicts that privacy regulation may affect predominantly large firms, even if - as our data confirms - these large firms tend to offer more privacy. Our empirical results show that, if any, only large firms were negatively affected, suggesting that privacy regulation might boost competition by leveling out the playing field for small firms.

Keywords: Privacy; Competition; Regulation; ePrivacy Directive (search for similar items in EconPapers)
JEL-codes: D43 L86 M37 M38 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-com, nep-ind and nep-pay
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:dicedp:308

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