International protection of consumer data

We study the international protection of consumer data in a model where data from product sales generate additional revenue to firms but disutility to consumers. When data usage lacks transparency, a firm suffers a commitment problem and overuses consumer data. Greater transparency enables the firm to commit to less data usage, which boosts consumer demand and leads to a higher price but also higher output if the firm operates only in one country. A multinational firm faces more challenges when balancing the trade-offs in data usage across countries that differ in consumer preferences for privacy. Contrary to the result for a single country, more transparency can exacerbate data-usage and output distortions in the global economy, and unilateral data regulation by a country may reduce global welfare. There can be substantial gains from international coordination—though not necessarily uniformity—of data regulations.