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Privacy Costs and Consumer Data Acquisition: An Economic Analysis of Data Privacy Regulation

Author

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  • Zhijun Chen

    (Monash University, Department of Economics)

Abstract

General Data Protection Regulation (GDPR) aims to protect consumer data privacy, however, its adverse effects have been widely documented. We present a new model for the analysis of consumer data acquisition under privacy regulation. We treat both data and analytics as separate strategic variables and consider the heterogeneity of privacy costs across consumers. Using this model to examine the impact of GDPR, we identify a market failure before GDPR and find that GDPR activates a market for data acquisition by imposing consent requirements on data acquisition. We further study the optimal design of the mechanism for consumer data acquisition and deliver important policy implications for implementing the social optimum.

Suggested Citation

  • Zhijun Chen, 2022. "Privacy Costs and Consumer Data Acquisition: An Economic Analysis of Data Privacy Regulation," Monash Economics Working Papers 2022-07, Monash University, Department of Economics.
    • Handle: RePEc:mos:moswps:2022-07
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    Citations

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    Cited by:

    1. Chongwoo Choe & Noriaki Matsushima & Shiva Shekhar, 2023. "The Bright Side of the GDPR: Welfare-improving Privacy Management," Monash Economics Working Papers 2023-14, Monash University, Department of Economics.
    2. Alessandro Bonatti, 2023. "The Platform Dimension of Digital Privacy," NBER Chapters, in: The Economics of Privacy, National Bureau of Economic Research, Inc.
    3. Itay P. Fainmesser & Andrea Galeotti & Ruslan Momot, 2023. "Digital Privacy," Management Science, INFORMS, vol. 69(6), pages 3157-3173, June.

    More about this item

    Keywords

    Data acquisition; Privacy Costs; and Data Analytics;
    All these keywords.

    JEL classification:

    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law

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