Privacy and personal data collection with information externalities
We provide a theoretical model of privacy in which data collection requires consumers' consent and consumers are fully aware of the consequences of such consent. Nonetheless, excessive collection of personal information arises in the monopoly market equilibrium which results in excessive loss o...
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| Veröffentlicht in: | Journal of public economics Jg. 173; S. 113 - 124 |
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| Hauptverfasser: | , , |
| Format: | Journal Article |
| Sprache: | Englisch |
| Veröffentlicht: |
Elsevier B.V
01.05.2019
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| ISSN: | 0047-2727, 1879-2316 |
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| Abstract | We provide a theoretical model of privacy in which data collection requires consumers' consent and consumers are fully aware of the consequences of such consent. Nonetheless, excessive collection of personal information arises in the monopoly market equilibrium which results in excessive loss of privacy compared to the social optimum. The main mechanism for this result is information externalities and users' coordination failure in which some users' decision to share their personal information may allow the data controller to infer more information about non-users. We also show that the emergence of data brokerage industry can facilitate the collection and monetization of users' personal data even in a fragmented market where no individual website has incentives to do so independently due to scale economies in data analytics. We discuss policy implications of our analysis in light of the recent EU General Data Protection Regulation (GDPR). |
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| AbstractList | We provide a theoretical model of privacy in which data collection requires consumers' consent and consumers are fully aware of the consequences of such consent. Nonetheless, excessive collection of personal information arises in the monopoly market equilibrium which results in excessive loss of privacy compared to the social optimum. The main mechanism for this result is information externalities and users' coordination failure in which some users' decision to share their personal information may allow the data controller to infer more information about non-users. We also show that the emergence of data brokerage industry can facilitate the collection and monetization of users' personal data even in a fragmented market where no individual website has incentives to do so independently due to scale economies in data analytics. We discuss policy implications of our analysis in light of the recent EU General Data Protection Regulation (GDPR). |
| Author | Kim, Byung-Cheol Choi, Jay Pil Jeon, Doh-Shin |
| Author_xml | – sequence: 1 givenname: Jay Pil surname: Choi fullname: Choi, Jay Pil email: choijay@msu.edu organization: Michigan State University, 220A Marshall-Adams Hall, East Lansing, MI 48824–1038, USA – sequence: 2 givenname: Doh-Shin surname: Jeon fullname: Jeon, Doh-Shin email: dohshin.jeon@gmail.com organization: Toulouse School of Economics, University of Toulouse Capitole, Manufacture de Tabacs, 21 allees de Brienne, 31000 Toulouse, France – sequence: 3 givenname: Byung-Cheol surname: Kim fullname: Kim, Byung-Cheol email: bkim34@cba.ua.edu organization: Department of Economics, Finance, & Legal Studies, Culverhouse College of Business, University of Alabama, Tuscaloosa, AL, 35487, USA |
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