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Data Markets with Privacy-Conscious Consumers

Author

Listed:
  • Rossella Argenziano
  • Alessandro Bonatti

Abstract

We study data linkages among heterogeneous firms and examine how they shape the outcome of privacy regulation. A single consumer interacts sequentially with two firms: one firm collects data on consumer behavior, and the other firm leverages the data to set a quality level and a price. Privacy-conscious consumers distort their purchases from a data-collecting firm to manipulate the data-using firm's beliefs. We identify conditions under which data linkages increase total firm profits. Therefore, if firms can trade consumer data efficiently, our setting provides a rationale for the existence of data markets even with privacy-conscious consumers.

Suggested Citation

  • Rossella Argenziano & Alessandro Bonatti, 2023. "Data Markets with Privacy-Conscious Consumers," AEA Papers and Proceedings, American Economic Association, vol. 113, pages 191-196, May.
    • Handle: RePEc:aea:apandp:v:113:y:2023:p:191-96
    DOI: 10.1257/pandp.20231083
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    More about this item

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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