On the Private and Social Value of Consumer Data in Vertically-Integrated Platform Markets

40 Pages Posted: 24 Nov 2020 Last revised: 10 Sep 2021

See all articles by Jakub Kastl

Jakub Kastl

Princeton University - Department of Economics; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Jorge Padilla

Compass Lexecon

Salvatore Piccolo

University of Bergamo, Compass Lexecon and CSEF

Helder Vasconcelos

Universidade do Porto - Faculdade de Economia (FEP)

Date Written: October 11, 2020

Abstract

We characterize and compare the private and social incentives to collect consumer data by a vertically-integrated online intermediary who competes with third-party sellers listed on its platform and is required by regulation to share with rivals all the information it gathers. With linear intermediation fees and price competition, the intermediary over-invests in accuracy compared to the social optimum when the intra-platform competition is sufficiently weak and when demand is not too responsive to quality. By contrast, the intermediary tends to under-invest in accuracy when the intra-platform competition is strong enough, and demand is sufficiently responsive to quality. With quantity competition, the intermediary always over-invests in accuracy. Importantly, when consumers exhibit privacy concerns, the over-investment problem worsens, whereas the under-investment problem mitigates. We also investigate the impact of alternative (non-linear) contractual arrangements.

Keywords: Consumer Data, Competition, Information Accuracy, Platforms, Privacy, Value of Information, Vertical Integration

JEL Classification: D47, D85, L5, L81, M3

Suggested Citation

Kastl, Jakub and Padilla, Jorge and Piccolo, Salvatore and Vasconcelos, Helder, On the Private and Social Value of Consumer Data in Vertically-Integrated Platform Markets (October 11, 2020). Available at SSRN: https://ssrn.com/abstract=3709115 or http://dx.doi.org/10.2139/ssrn.3709115

Jakub Kastl

Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Jorge Padilla

Compass Lexecon ( email )

Paseo de la Castellana 7
Madrid, 28046
Spain

Salvatore Piccolo (Contact Author)

University of Bergamo, Compass Lexecon and CSEF ( email )

via de caniana 2
24127
Bergamo, BG 24127
Italy

Helder Vasconcelos

Universidade do Porto - Faculdade de Economia (FEP) ( email )

Rua Dr. Roberto Frias
s/n
4200-464 Porto, 4200-464
Portugal

HOME PAGE: http://www.fep.up.pt/docentes/hvasconcelos

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