Privacy concerns and data rights regulation in digital markets

In response to rising privacy concerns from potential data misuse fueled by digital development, policymakers have implemented various privacy regulation policies. These regulations are progressively enhancing consumers’ control over their personal data, making it commonplace for them to make informed decisions about data sharing. Using an analytical framework, we examine how consumers’ data control rights shape consumer-firm interactions and decisions. Interestingly, we find that the data rights regulation consistently motivates firms to set higher product prices. Moreover, we show that this regulation for consumers can confer benefits onto firms in both monopoly and duopoly settings. In a duopoly market, data rights regulation may counter the Matthew effect by redistributing competitive advantages from superior to inferior firms, reducing monopolization risks. Unfortunately, our findings indicate that granting consumers data control rights can reduce their surplus, as they may have to pay higher prices for the privacy security these rights provide.