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Paying with Personal Data

Author

Listed:
  • Natvik, Gisle J.

    (Department of Economics)

  • Tangerås, Thomas

    (Research Institute of Industrial Economics (IFN))

Abstract

We study commercialization of personal data through personalized advertising by a content platform. Content consumption generates productive data about consumer preferences. The firm invests in artificial intelligence (AI) to improve analytical power and in quality to stimulate content consumption. The profit-maximizing tariff is zero if productive data are highly valuable. Subsidization of usage would generate nonproductive data and be unprofitable. Data provision is efficient when users pay entirely with personal data because then content consumption optimally trades off improvements in user experience against losses in privacy rent. Still, privacy protection is inefficient because of distorted incentives to invest in AI.

Suggested Citation

  • Natvik, Gisle J. & Tangerås, Thomas, 2023. "Paying with Personal Data," Working Paper Series 1481, Research Institute of Industrial Economics.
    • Handle: RePEc:hhs:iuiwop:1481
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    References listed on IDEAS

    as
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    More about this item

    Keywords

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    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising

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