Privacy and personal data collection with information externalities

Jay Pil Choi, Doh Shin Jeon, Byung Cheol Kim

Research output: Contribution to journalArticle

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).

Original languageEnglish
Pages (from-to)113-124
Number of pages12
JournalJournal of Public Economics
Volume173
DOIs
Publication statusPublished - 2019 May

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Information externalities
Data collection
Privacy
Personal data
Consent
Personal information
Data protection
Policy implications
Controller
Industry
Coordination failure
Social optimum
Monopoly
Market equilibrium
Web sites
Brokerage
Incentives
Scale economies

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

Cite this

Choi, Jay Pil ; Jeon, Doh Shin ; Kim, Byung Cheol. / Privacy and personal data collection with information externalities. In: Journal of Public Economics. 2019 ; Vol. 173. pp. 113-124.
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Privacy and personal data collection with information externalities. / Choi, Jay Pil; Jeon, Doh Shin; Kim, Byung Cheol.

In: Journal of Public Economics, Vol. 173, 05.2019, p. 113-124.

Research output: Contribution to journalArticle

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