The intricate tale of demand and supply of personal data

In this article, we develop some of the economics of the intricate relationship between the demand and the supply of personalized data. We first focus on one heavily debated use of personal data: differential pricing (price discrimination). This allows us to highlight the role played by privacy protection, the impact on consumer welfare and the incentives of data brokers to share their data with firms competing on the product market, thereby articulating some of the forces that can influence the supply of and demand for digital personal data. We then touch upon broader questions regarding the supply and the demand for personal data and conclude by arguing that we are currently not yet in a world of “real” data “markets”: personal data are transacted most of the time by relying on hybrid contracts.

I. Introduction 1. It is nowadays ever so common to share personal information with the companies and institutions we interact with. We indeed leave, consciously or not, a digital trace when interacting through social networks, when purchasing goods and services online or simply when browsing websites for our own entertainment. 2. Thanks to continuously decreasing costs of processing data and also to improved data algorithms, firms (and other institutions) can combine sets of digital data to know more about each one of us. Firms can then use this knowledge to improve their value proposition to their customers with the ultimate purpose to enhance their revenue base. The latter can happen through product and service customization, personalized advertising or targeted pricing.

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Paul Belleflamme, Wouter Vergote, The intricate tale of demand and supply of personal data, September 2018, Concurrences Review N° 3-2018, Art. N° 87528, pp. 45-52

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