CFDP 2203

The Economics of Social Data

Author(s): 

Publication Date: September 2019

Pages: 60

Abstract: 

A data intermediary pays consumers for information about their preferences, and sells the information so-acquired to firms that use it to tailor their product offers and prices. The social dimension of the individual data - whereby an individual’s data is predictive of the behavior of others - generates a data externality that reduces the intermediary’s cost of acquiring information. We derive the data intermediary’s optimal information policy, and show that it preserves privacy over the identity of the consumers, but provides precise information about market demand to the firms.

Keywords: Consumer privacy, Social data; Personal information, Data intermediaries, data flow, Data policy, Data rights

JEL Classification Codes: D44, D82, D83.

JEL Classification Codes: D44D82D83