IDEAS home Printed from https://ideas.repec.org/p/rco/dpaper/67.html
   My bibliography  Save this paper

Privacy and Platform Competition

Author

Listed:
  • Dimakopoulos, Philipp

    (Humboldt University Berlin)

  • Sudaric, Slobodan

    (Humboldt University Berlin)

Abstract

We analyze platform competition where user data is collected to improve adtargeting. Considering that users incur privacy costs, we show that the equilibrium level of data provision is distorted and can be inefficiently high or low: if overall competition is weak or if targeting benefits are low, too much private data is collected, and vice-versa. Further, we find that softer competition on either market side leads to more data collection, which implies substitutability between competition policy measures on both market sides. Moreover, if platforms engage in two-sided pricing, data provision is efficient.

Suggested Citation

  • Dimakopoulos, Philipp & Sudaric, Slobodan, 2018. "Privacy and Platform Competition," Rationality and Competition Discussion Paper Series 67, CRC TRR 190 Rationality and Competition.
    • Handle: RePEc:rco:dpaper:67
    as

    Download full text from publisher

    File URL: https://rationality-and-competition.de/wp-content/uploads/discussion_paper/67.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Marc Bourreau & Bernard Caillaud & Romain De Nijs, 2018. "Taxation of a digital monopoly platform," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 20(1), pages 40-51, February.
    2. Reisinger, Markus, 2012. "Platform competition for advertisers and users in media markets," International Journal of Industrial Organization, Elsevier, vol. 30(2), pages 243-252.
    3. Simon P. Anderson & Stephen Coate, 2005. "Market Provision of Broadcasting: A Welfare Analysis," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 72(4), pages 947-972.
    4. Spiegel, Yossi, 2013. "Commercial software, adware, and consumer privacy," International Journal of Industrial Organization, Elsevier, vol. 31(6), pages 702-713.
    5. Francis Bloch & Gabrielle Demange, 2018. "Taxation and privacy protection on Internet platforms," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 20(1), pages 52-66, February.
    6. Peitz, Martin & Valletti, Tommaso M., 2008. "Content and advertising in the media: Pay-tv versus free-to-air," International Journal of Industrial Organization, Elsevier, vol. 26(4), pages 949-965, July.
    7. Mark Armstrong & Julian Wright, 2007. "Two-sided Markets, Competitive Bottlenecks and Exclusive Contracts," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 32(2), pages 353-380, August.
    8. Posner, Richard A, 1981. "The Economics of Privacy," American Economic Review, American Economic Association, vol. 71(2), pages 405-409, May.
      • Posner, Richard A., 1980. "The Economics of Privacy," Working Papers 16, The University of Chicago Booth School of Business, George J. Stigler Center for the Study of the Economy and the State.
    9. Mark Armstrong Author-Email: mark.armstrong@ucl.ac.uk Author-Workplace-Name: University College of London, 2006. "Competition in Two-Sided Markets," RAND Journal of Economics, The RAND Corporation, vol. 37(3), pages 668-691, Autumn.
    10. Ramon Casadesus-Masanell & Andres Hervas-Drane, 2015. "Competing with Privacy," Management Science, INFORMS, vol. 61(1), pages 229-246, January.
    11. Alexandre de Corniere & Romain De Nijs, 2013. "Online Advertising and Privacy," Economics Series Working Papers 650, University of Oxford, Department of Economics.
    12. Alexandre de Cornière & Romain de Nijs, 2016. "Online advertising and privacy," RAND Journal of Economics, RAND Corporation, vol. 47(1), pages 48-72, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kesler, Reinhold & Kummer, Michael E. & Schulte, Patrick, 2019. "Competition and privacy in online markets: Evidence from the mobile app industry," ZEW Discussion Papers 19-064, ZEW - Leibniz Centre for European Economic Research.
    2. Congiu, Raffaele & Sabatino, Lorien & Sapi, Geza, 2022. "The Impact of Privacy Regulation on Web Traffic: Evidence From the GDPR," Information Economics and Policy, Elsevier, vol. 61(C).
    3. Lefouili, Yassine & Toh, Ying Lei & Madio, Leonardo, 2017. "Privacy Regulation and Quality-Enhancing Innovation," TSE Working Papers 17-795, Toulouse School of Economics (TSE), revised Jul 2023.
    4. Sabatino, Lorien & Sapi, Geza, 2022. "Online privacy and market structure: Theory and evidence," Information Economics and Policy, Elsevier, vol. 60(C).
    5. Pauline Affeldt & Reinhold Kesler, 2021. "Competitors’ Reactions to Big Tech Acquisitions: Evidence from Mobile Apps," Discussion Papers of DIW Berlin 1987, DIW Berlin, German Institute for Economic Research.
    6. Michael L. Katz, 2019. "Multisided Platforms, Big Data, and a Little Antitrust Policy," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 54(4), pages 695-716, June.
    7. Natvik, Gisle J. & Tangerås, Thomas, 2023. "Paying with Personal Data," Working Paper Series 1481, Research Institute of Industrial Economics.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Philipp Dimakopoulos & Slobodan Sudaric, 2017. "Privacy and Platform Competition," Working Papers 2017003, Berlin Doctoral Program in Economics and Management Science (BDPEMS).
    2. Dimakopoulos, Philipp D. & Sudaric, Slobodan, 2018. "Privacy and platform competition," International Journal of Industrial Organization, Elsevier, vol. 61(C), pages 686-713.
    3. Esther Gal-Or & Ronen Gal-Or & Nabita Penmetsa, 2018. "The Role of User Privacy Concerns in Shaping Competition Among Platforms," Information Systems Research, INFORMS, vol. 29(3), pages 698-722, September.
    4. Francis Bloch & Gabrielle Demange, 2018. "Taxation and privacy protection on Internet platforms," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 20(1), pages 52-66, February.
    5. Xiaoying Cheng & Lifeng Mu & Yanhong Sun & Yiwen Bian, 2018. "Optimal Pricing Decisions for the Online Video Platform Under Customer Choice," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 35(01), pages 1-21, February.
    6. Anna D’Annunzio & Antonio Russo, 2020. "Ad Networks and Consumer Tracking," Management Science, INFORMS, vol. 66(11), pages 5040-5058, November.
    7. Xu, Jun, 2013. "A two-sided market model of optimal price structure for instant messenger," MPRA Paper 62960, University Library of Munich, Germany.
    8. Attila Ambrus & Emilio Calvano & Markus Reisinger, 2016. "Either or Both Competition: A "Two-Sided" Theory of Advertising with Overlapping Viewerships," American Economic Journal: Microeconomics, American Economic Association, vol. 8(3), pages 189-222, August.
    9. Dengler, Sebastian & Prüfer, Jens, 2021. "Consumers' privacy choices in the era of big data," Games and Economic Behavior, Elsevier, vol. 130(C), pages 499-520.
    10. Kim, Sung-min, 2014. "Policy on the media platform industry: The analysis of pricing policies of internet media with two-sided market theory," 25th European Regional ITS Conference, Brussels 2014 101395, International Telecommunications Society (ITS).
    11. Armando José Garcia Pires, 2023. "Ad-Valorem Taxes, Prices and Content Diversification in the News Market," Games, MDPI, vol. 14(2), pages 1-28, March.
    12. Carroni, Elias & Paolini, Dimitri, 2020. "Business models for streaming platforms: Content acquisition, advertising and users," Information Economics and Policy, Elsevier, vol. 52(C).
    13. Thöne, Miriam & Rasch, Alexander & Wenzel, Tobias, 2016. "Business models in commercial media markets: Bargaining, advertising, and mixing," VfS Annual Conference 2016 (Augsburg): Demographic Change 145785, Verein für Socialpolitik / German Economic Association.
    14. Xudong Lin & Shuilin Liu & Xiaoli Huang & Hanyang Luo & Sumin Yu, 2021. "Platform Revenue Strategy Selection Considering Consumer Group Data Privacy Regulation," Mathematics, MDPI, vol. 9(22), pages 1-24, November.
    15. von Ehrlich, Maximilian & Greiner, Tanja, 2013. "The role of online platforms for media markets — Two-dimensional spatial competition in a two-sided market," International Journal of Industrial Organization, Elsevier, vol. 31(6), pages 723-737.
    16. Choi, Jay Pil & Jeon, Doh-Shin & Kim, Byung-Cheol, 2019. "Privacy and personal data collection with information externalities," Journal of Public Economics, Elsevier, vol. 173(C), pages 113-124.
    17. David S. Evans & Richard Schmalensee, 2013. "The Antitrust Analysis of Multi-Sided Platform Businesses," NBER Working Papers 18783, National Bureau of Economic Research, Inc.
    18. Maria Battaggion & Alessandro Vaglio, 2015. "Watchdogs, Platforms and Audience: An Economic Perspective on Media Markets," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 43(2), pages 209-228, June.
    19. E. Carroni & D. Paolini, 2019. "The business model of a streaming platform," Working Paper CRENoS 201902, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    20. Reisinger, Markus, 2012. "Platform competition for advertisers and users in media markets," International Journal of Industrial Organization, Elsevier, vol. 30(2), pages 243-252.

    More about this item

    Keywords

    ad targeting; platform competition; privacy; user data;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rco:dpaper:67. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Viviana Lalli (email available below). General contact details of provider: https://rationality-and-competition.de .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.