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Consumer privacy in oligopolistic markets: Winners, losers, and welfare

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  • Taylor, Curtis
  • Wagman, Liad

Abstract

Motivated by the unprecedented availability of consumer information on the Internet, we characterize the winners and losers from potential privacy regulation in the context of four commonly-used oligopoly models: a linear city model, a circular city model, a vertical differentiation model, and a multi-unit symmetric demand model. We show that while there are winners and losers as a result of privacy enforcement, the parties who stand to benefit and the parties who stand to lose, as well as whether social welfare is enhanced or diminished, largely depends on the specific economic setting under consideration.

Suggested Citation

  • Taylor, Curtis & Wagman, Liad, 2014. "Consumer privacy in oligopolistic markets: Winners, losers, and welfare," International Journal of Industrial Organization, Elsevier, vol. 34(C), pages 80-84.
  • Handle: RePEc:eee:indorg:v:34:y:2014:i:c:p:80-84
    DOI: 10.1016/j.ijindorg.2014.02.010
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    References listed on IDEAS

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    1. Avi Goldfarb & Catherine Tucker, 2012. "Privacy and Innovation," NBER Chapters, in: Innovation Policy and the Economy, Volume 12, pages 65-89, National Bureau of Economic Research, Inc.
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    Citations

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    Cited by:

    1. Anderson, Simon P & Baik, Alicia & Larson, Nathan, 2019. "Price Discrimination in the Information Age: Prices, Poaching, and Privacy with Personalized Targeted Discounts," CEPR Discussion Papers 13793, C.E.P.R. Discussion Papers.
    2. Marta Rocha & Thomas Greve, 2016. "Contracting in a market with differential information," Working Papers EPRG 1624, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    3. Tommaso Valletti & Jiahua Wu, 2020. "Consumer Profiling with Data Requirements: Structure and Policy Implications," Production and Operations Management, Production and Operations Management Society, vol. 29(2), pages 309-329, February.
    4. Rodrigo Montes & Wilfried Sand-Zantman & Tommaso Valletti, 2019. "The Value of Personal Information in Online Markets with Endogenous Privacy," Management Science, INFORMS, vol. 65(3), pages 1342-1362, March.
    5. Alessandro Acquisti & Curtis Taylor & Liad Wagman, 2016. "The Economics of Privacy," Journal of Economic Literature, American Economic Association, vol. 54(2), pages 442-492, June.
    6. Norman, George & Pepall, Lynne & Richards, Dan & Tan, Liang, 2016. "Competition and consumer data: The good, the bad, and the ugly," Research in Economics, Elsevier, vol. 70(4), pages 752-765.
    7. Chiara Conti & Pierfrancesco Reverberi, 2019. "Price discrimination and product quality under opt-in privacy regulation," DIAG Technical Reports 2019-07, Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza".
    8. David Bounie & Antoine Dubus & Patrick Waelbroeck, 2018. "Selling Strategic Information in Digital Competitive Markets," Working Papers hal-01794886, HAL.
    9. David Bounie & Antoine Dubus & Patrick Waelbroeck, 2018. "Selling Strategic Information in Digital Competitive Markets," CESifo Working Paper Series 7078, CESifo.
    10. Rodrigo Montes & Wilfried Sand-Zantman & Tommaso Valletti, 2015. "The Value of Personal Information in Markets with Endogenous Privacy," CEIS Research Paper 352, Tor Vergata University, CEIS, revised 05 Aug 2015.
    11. Jin-Hyuk Kim & Liad Wagman, 2015. "Screening incentives and privacy protection in financial markets: a theoretical and empirical analysis," RAND Journal of Economics, RAND Corporation, vol. 46(1), pages 1-22, March.
    12. Lynne Pepall & Dan Richards, 2018. "Targeted Branding, Price Competition and Consumer Data," Discussion Papers Series, Department of Economics, Tufts University 0824, Department of Economics, Tufts University.
    13. Yongmin Chen & Xinyu Hua & Keith E. Maskus, 2020. "International Protection of Consumer Data," CESifo Working Paper Series 8391, CESifo.
    14. Michael R. Baye & David E. M. Sappington, 2020. "Revealing transactions data to third parties: Implications of privacy regimes for welfare in online markets," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 29(2), pages 260-275, April.
    15. Loertscher, Simon & Marx, Leslie M., 2020. "Digital monopolies: Privacy protection or price regulation?," International Journal of Industrial Organization, Elsevier, vol. 71(C).
    16. Yiquan Gu & Leonardo Madio & Carlo Reggiani, 2019. "Exclusive Data, Price Manipulation and Market Leadership," CESifo Working Paper Series 7853, CESifo.
    17. Chen, Yongmin, 2020. "Improving Market Performance in the Digital Economy," MPRA Paper 100344, University Library of Munich, Germany.

    More about this item

    Keywords

    Privacy; Competition; Oligopoly; Consumer information;

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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