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Regulating Data Privacy and Cybersecurity

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  • Wing Man Wynne Lam
  • Jacob Seifert

Abstract

This paper studies firms' data privacy and cybersecurity choices. We emphasise the strategic interdependence between these decisions and demonstrate that security in both the market equilibrium and the social optimum tends to be higher when data is shared. We also identify important market failures in the sense that firms tend to under‐invest in security and over‐share data. Our welfare analysis of a minimum security standard, disclosure and consumer education policies, liability rules and consumer mitigation strategies highlights the need for a co‐ordinated approach to regulation.

Suggested Citation

  • Wing Man Wynne Lam & Jacob Seifert, 2023. "Regulating Data Privacy and Cybersecurity," Journal of Industrial Economics, Wiley Blackwell, vol. 71(1), pages 143-175, March.
    • Handle: RePEc:bla:jindec:v:71:y:2023:i:1:p:143-175
    DOI: 10.1111/joie.12316
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    References listed on IDEAS

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    1. Jullien, Bruno & Lefouili, Yassine & Riordan, Michael, 2018. "Privacy Protection, Security, and Consumer Retention," TSE Working Papers 18-947, Toulouse School of Economics (TSE), revised Jun 2020.
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    3. Lamoreaux, N., 2019. "The Problem of Bigness: From Standard Oil to Google," Cambridge Working Papers in Economics 1963, Faculty of Economics, University of Cambridge.
    4. Naomi R. Lamoreaux, 2019. "The Problem of Bigness: From Standard Oil to Google," Journal of Economic Perspectives, American Economic Association, vol. 33(3), pages 94-117, Summer.
    5. Jay Pil Choi & Chaim Fershtman & Neil Gandal, 2010. "Network Security: Vulnerabilities And Disclosure Policy," Journal of Industrial Economics, Wiley Blackwell, vol. 58(4), pages 868-894, December.
    6. Shota Ichihashi, 2020. "Online Privacy and Information Disclosure by Consumers," American Economic Review, American Economic Association, vol. 110(2), pages 569-595, February.
    7. Curtis R. Taylor, 2004. "Consumer Privacy and the Market for Customer Information," RAND Journal of Economics, The RAND Corporation, vol. 35(4), pages 631-650, Winter.
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