IDEAS home Printed from https://ideas.repec.org/a/eee/jfinec/v169y2025ics0304405x25000613.html

Data sales and data dilution

Author

Listed:
  • Liu, Ernest
  • Ma, Song
  • Veldkamp, Laura

Abstract

We explore indicators of market power in a data market. Markups cannot measure competition, because most data products’ marginal cost is zero, making the markup infinite. Yet, data monopolists may not exert monopoly power because they cannot commit to restricting data sales to future customers. This limited commitment and strategic substitutability of data undermine sellers’ monopoly power. But data subscriptions restore this monopoly power. Evidence from online data markets supports the model’s insight that subscriptions indicate market power. Model and evidence reveal that data subscriptions are better for consumers because they sustain the incentive to invest in high-quality data.

Suggested Citation

  • Liu, Ernest & Ma, Song & Veldkamp, Laura, 2025. "Data sales and data dilution," Journal of Financial Economics, Elsevier, vol. 169(C).
    • Handle: RePEc:eee:jfinec:v:169:y:2025:i:c:s0304405x25000613
    DOI: 10.1016/j.jfineco.2025.104053
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0304405X25000613
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jfineco.2025.104053?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Green, Daniel & Liu, Ernest, 2021. "A dynamic theory of multiple borrowing," Journal of Financial Economics, Elsevier, vol. 139(2), pages 389-404.
    2. Dirk Bergemann & Stephen Morris, 2013. "Robust Predictions in Games With Incomplete Information," Econometrica, Econometric Society, vol. 81(4), pages 1251-1308, July.
    3. Christian Hellwig & Sebastian Kohls & Laura Veldkamp, 2012. "Information Choice Technologies," American Economic Review, American Economic Association, vol. 102(3), pages 35-40, May.
    4. Lin William Cong & Danxia Xie & Longtian Zhang, 2021. "Knowledge Accumulation, Privacy, and Growth in a Data Economy," Management Science, INFORMS, vol. 67(10), pages 6480-6492, October.
    5. repec:cwl:cwldpp:1821rrr is not listed on IDEAS
    6. Shota Ichihashi, 2020. "Online Privacy and Information Disclosure by Consumers," American Economic Review, American Economic Association, vol. 110(2), pages 569-595, February.
    7. Richard Arnott & Joseph Stiglitz, 1993. "Price Equilibrium, Efficiency, And Decentralizability In Insurance Markets With Moral Hazard," Boston College Working Papers in Economics 254, Boston College Department of Economics.
    8. Dirk Bergemann & Alessandro Bonatti, 2024. "Data, Competition, and Digital Platforms," American Economic Review, American Economic Association, vol. 114(8), pages 2553-2595, August.
    9. Ma, Song & Murfin, Justin & Pratt, Ryan, 2022. "Young firms, old capital," Journal of Financial Economics, Elsevier, vol. 146(1), pages 331-356.
    10. Admati, Anat R. & Pfleiderer, Paul, 1986. "A monopolistic market for information," Journal of Economic Theory, Elsevier, vol. 39(2), pages 400-438, August.
    11. Markus K. Brunnermeier & Martin Oehmke, 2013. "The Maturity Rat Race," Journal of Finance, American Finance Association, vol. 68(2), pages 483-521, April.
    12. Richard Arnott & Joseph Stiglitz, 1991. "Equilibrium in Competitive Insurance Markets with Moral Hazard," NBER Working Papers 3588, National Bureau of Economic Research, Inc.
    13. Dirk Bergemann & Alessandro Bonatti & Alex Smolin, 2018. "The Design and Price of Information," American Economic Review, American Economic Association, vol. 108(1), pages 1-48, January.
    14. Toni M. Whited & Guojun Wu, 2006. "Financial Constraints Risk," The Review of Financial Studies, Society for Financial Studies, vol. 19(2), pages 531-559.
    15. Grossman, Sanford J & Stiglitz, Joseph E, 1980. "On the Impossibility of Informationally Efficient Markets," American Economic Review, American Economic Association, vol. 70(3), pages 393-408, June.
    16. Charles J. Hadlock & Joshua R. Pierce, 2010. "New Evidence on Measuring Financial Constraints: Moving Beyond the KZ Index," The Review of Financial Studies, Society for Financial Studies, vol. 23(5), pages 1909-1940.
    17. Charles I. Jones & Christopher Tonetti, 2020. "Nonrivalry and the Economics of Data," American Economic Review, American Economic Association, vol. 110(9), pages 2819-2858, September.
    18. Ilya Segal, 1999. "Contracting with Externalities," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(2), pages 337-388.
    19. Rishabh Kirpalani & Thomas Philippon, 2020. "Data Sharing and Market Power with Two-Sided Platforms," NBER Working Papers 28023, National Bureau of Economic Research, Inc.
    20. Kai Hao Yang, 2022. "Selling Consumer Data for Profit: Optimal Market-Segmentation Design and Its Consequences," American Economic Review, American Economic Association, vol. 112(4), pages 1364-1393, April.
    21. Peter M. Demarzo & Zhiguo He, 2021. "Leverage Dynamics without Commitment," Journal of Finance, American Finance Association, vol. 76(3), pages 1195-1250, June.
    22. Admati, Anat R & Pfleiderer, Paul, 1990. "Direct and Indirect Sale of Information," Econometrica, Econometric Society, vol. 58(4), pages 901-928, July.
    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. Xiao, Shengpeng & Wu, Kedong & Xiao, Xiao & Lin, Changqing, 2025. "How do data assets affect firm investment?," International Review of Financial Analysis, Elsevier, vol. 106(C).
    2. Agur, Itai & Ari, Anil & Dell’Ariccia, Giovanni, 2025. "Bank competition and household privacy in a digital payment monopoly," Journal of Financial Economics, Elsevier, vol. 166(C).
    3. Mihet, Roxana & Rishabh, Kumar & Gomes, Orlando, 2026. "Is it AI or data that drives firm market power?," Journal of Monetary Economics, Elsevier, vol. 157(C).

    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. Alessandro Bonatti, 2023. "The Platform Dimension of Digital Privacy," NBER Chapters, in: The Economics of Privacy, pages 73-96, National Bureau of Economic Research, Inc.
    2. Arlindo Skenderaj, 2025. "Selling supplemental information," Papers 2511.14103, arXiv.org, revised Feb 2026.
    3. Dirk Bergemann & Alessandro Bonatti, 2019. "Markets for Information: An Introduction," Annual Review of Economics, Annual Reviews, vol. 11(1), pages 85-107, August.
    4. Cong, Lin William & Wei, Wenshi & Xie, Danxia & Zhang, Longtian, 2022. "Endogenous growth under multiple uses of data," Journal of Economic Dynamics and Control, Elsevier, vol. 141(C).
    5. Bergemann, Dirk & Ottaviani, Marco, 2021. "Information Markets and Nonmarkets," CEPR Discussion Papers 16459, Centre for Economic Policy Research.
    6. Andrew Li & R. Ravi & Karan Singh & Zihong Yi & Weizhong Zhang, 2025. "How to Sell High-Dimensional Data Optimally," Papers 2510.15214, arXiv.org, revised Mar 2026.
    7. Bonatti, Alessandro & Dahleh, Munther & Horel, Thibaut & Nouripour, Amir, 2024. "Selling information in competitive environments," Journal of Economic Theory, Elsevier, vol. 216(C).
    8. Teddy Mekonnen & Bobak Pakzad-Hurson, 2024. "Competition, Persuasion, and Search," Papers 2411.11183, arXiv.org, revised May 2026.
    9. Yingkai Li, 2021. "Selling Data to an Agent with Endogenous Information," Papers 2103.05788, arXiv.org, revised Aug 2023.
    10. Padilla, Jorge & Piccolo, Salvatore & Vasconcelos, Helder, 2021. "Should vertically integrated platforms be mandated to share information with their rivals?," Economics Letters, Elsevier, vol. 203(C).
    11. Flavio Pino, 2022. "The microeconomics of data – a survey," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 49(3), pages 635-665, September.
    12. Gabriel Desgranges & Celine Rochon, 2008. "Conformism, Public News and Market Effciency," OFRC Working Papers Series 2008fe16, Oxford Financial Research Centre.
    13. Shiyang Huang & Yan Xiong & Liyan Yang, 2022. "Skill Acquisition and Data Sales," Management Science, INFORMS, vol. 68(8), pages 6116-6144, August.
    14. David Bounie & Antoine Dubus & Patrick Waelbroeck, 2021. "Competition and Mergers with Strategic Data Intermediaries," CESifo Working Paper Series 9339, CESifo.
    15. Giovanni Cespa, 2008. "Information Sales and Insider Trading with Long‐Lived Information," Journal of Finance, American Finance Association, vol. 63(2), pages 639-672, April.
    16. Ronen Gradwohl & Moshe Tennenholtz, 2023. "Selling Data to a Competitor (Extended Abstract)," Papers 2307.05078, arXiv.org.
    17. repec:cam:camjip:2114 is not listed on IDEAS
    18. Guanming He & Helen Mengbing Ren & Richard Taffler, 2021. "Do corporate insiders trade on future stock price crash risk?," Review of Quantitative Finance and Accounting, Springer, vol. 56(4), pages 1561-1591, May.
    19. Saltuk Ozerturk, 2004. "Direct sale of information when precision is unobservable," Canadian Journal of Economics, Canadian Economics Association, vol. 37(2), pages 269-293, May.
    20. Avanidhar Subrahmanyam, 2009. "Optimal financial education," Review of Financial Economics, John Wiley & Sons, vol. 18(1), pages 1-9, January.
    21. Michele Bisceglia & Alessandro Bonatti & Fiona Scott Morton, 2025. "Regulating Privacy Policies on Digital Platforms," Cowles Foundation Discussion Papers 2474, Cowles Foundation for Research in Economics, Yale University.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

    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:eee:jfinec:v:169:y:2025:i:c:s0304405x25000613. 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: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/505576 .

    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.