IDEAS home Printed from https://ideas.repec.org/a/eee/ecolet/v195y2020ics0165176520302846.html
   My bibliography  Save this article

Does data protection legislation increase the quality of internet services?

Author

Listed:
  • Lam, Wing Man Wynne
  • Lyons, Bruce

Abstract

Digital firms attract consumers and collect their data by offering service enhancements and data security. These require separate types of investment. In light of the GDPR, data collection now requires explicit consumer consent, i.e. opt-in. This changes the consumer default option and the data provision decision when consumers are loss averse. We examine the consequences for investment. We set out the conditions under which opt-in increases both types of investment and when security comes at the expense of service quality. We further find that most consumer types gain, even when service quality falls.

Suggested Citation

  • Lam, Wing Man Wynne & Lyons, Bruce, 2020. "Does data protection legislation increase the quality of internet services?," Economics Letters, Elsevier, vol. 195(C).
    • Handle: RePEc:eee:ecolet:v:195:y:2020:i:c:s0165176520302846
    DOI: 10.1016/j.econlet.2020.109463
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0165176520302846
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.econlet.2020.109463?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Garrett A. Johnson & Scott K. Shriver & Shaoyin Du, 2020. "Consumer Privacy Choice in Online Advertising: Who Opts Out and at What Cost to Industry?," Marketing Science, INFORMS, vol. 39(1), pages 33-51, January.
    2. Guy Aridor & Yeon-Koo Che & Tobias Salz, 2020. "The Effect of Privacy Regulation on the Data Industry: Empirical Evidence from GDPR," NBER Working Papers 26900, National Bureau of Economic Research, Inc.
    3. Shota Ichihashi, 2020. "Online Privacy and Information Disclosure by Consumers," American Economic Review, American Economic Association, vol. 110(2), pages 569-595, February.
    4. Alessandro Acquisti & Curtis Taylor & Liad Wagman, 2016. "The Economics of Privacy," Journal of Economic Literature, American Economic Association, vol. 54(2), pages 442-492, June.
    5. Heidhues, Paul & Köszegi, Botond, 2018. "Behavioral Industrial Organization," CEPR Discussion Papers 12988, C.E.P.R. Discussion Papers.
    6. Daniel Kahneman & Jack L. Knetsch & Richard H. Thaler, 1991. "Anomalies: The Endowment Effect, Loss Aversion, and Status Quo Bias," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 193-206, Winter.
    7. Alessandro Acquisti & Leslie K. John & George Loewenstein, 2013. "What Is Privacy Worth?," The Journal of Legal Studies, University of Chicago Press, vol. 42(2), pages 249-274.
    8. Spiegler, Ran, 2014. "Bounded Rationality and Industrial Organization," OUP Catalogue, Oxford University Press, number 9780199334261.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Yosuke Uno & Akira Sonoda & Masaki Bessho, 2021. "The Economics of Privacy: A Primer Especially for Policymakers," Bank of Japan Working Paper Series 21-E-11, Bank of Japan.
    2. Anna D’Annunzio & Antonio Russo, 2024. "Intermediaries in the Online Advertising Market," Marketing Science, INFORMS, vol. 43(1), pages 33-53, January.
    3. Jeffrey T. Prince & Scott Wallsten, 2022. "How much is privacy worth around the world and across platforms?," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 31(4), pages 841-861, November.
    4. Dengler, Sebastian & Prüfer, Jens, 2021. "Consumers' privacy choices in the era of big data," Games and Economic Behavior, Elsevier, vol. 130(C), pages 499-520.
    5. Alireza Fallah & Michael I. Jordan & Ali Makhdoumi & Azarakhsh Malekian, 2024. "The Limits of Price Discrimination Under Privacy Constraints," Papers 2402.08223, arXiv.org, revised Jun 2024.
    6. Mert Demirer & Diego Jimenez-Hernandez & Dean Li & Sida Peng, 2024. "Data, Privacy Laws and Firm Production: Evidence from the GDPR," Working Paper Series WP 2024-02, Federal Reserve Bank of Chicago.
    7. Marianna Baggio & Luigi Mittone, 2016. "Experience and History: An Experimental Approach to Generational Heterogeneity," International Journal of Applied Behavioral Economics (IJABE), IGI Global, vol. 5(4), pages 1-23, October.
    8. Daniel Krähmer & Roland Strausz, 2023. "Optimal Nonlinear Pricing with Data-Sensitive Consumers," American Economic Journal: Microeconomics, American Economic Association, vol. 15(2), pages 80-108, May.
    9. Didier Laussel & Ngo Van Long & Joana Resende, 2023. "Profit Effects of Consumers’ Identity Management: A Dynamic Model," Management Science, INFORMS, vol. 69(6), pages 3602-3615, June.
    10. Cecere, Grazia & Le Guel, Fabrice & Soulié, Nicolas, 2012. "Perceived Internet privacy concerns on social network in Europe," MPRA Paper 41437, University Library of Munich, Germany.
    11. Frank Ebbers & Jan Zibuschka & Christian Zimmermann & Oliver Hinz, 2021. "User preferences for privacy features in digital assistants," Electronic Markets, Springer;IIM University of St. Gallen, vol. 31(2), pages 411-426, June.
    12. He, Zhiguo & Huang, Jing & Zhou, Jidong, 2023. "Open banking: Credit market competition when borrowers own the data," Journal of Financial Economics, Elsevier, vol. 147(2), pages 449-474.
    13. Ralf Elbert & Lowis Seikowsky, 2017. "The influences of behavioral biases, barriers and facilitators on the willingness of forwarders’ decision makers to modal shift from unimodal road freight transport to intermodal road–rail freight tra," Journal of Business Economics, Springer, vol. 87(8), pages 1083-1123, November.
    14. Itay P. Fainmesser & Andrea Galeotti & Ruslan Momot, 2023. "Digital Privacy," Management Science, INFORMS, vol. 69(6), pages 3157-3173, June.
    15. Frik, Alisa & Gaudeul, Alexia, 2018. "An experimental method for the elicitation of implicit attitudes to privacy risk," MPRA Paper 87845, University Library of Munich, Germany.
    16. Yassine Lefouili & Leonardo Madio & Ying Lei Toh, 2024. "Privacy Regulation and Quality‐Enhancing Innovation," Journal of Industrial Economics, Wiley Blackwell, vol. 72(2), pages 662-684, June.
    17. Li, Jianpei & Zhang, Wanzhu, 2024. "The Value of Anonymous Option," MPRA Paper 120010, University Library of Munich, Germany.
    18. Rehse, Dominik & Tremöhlen, Felix, 2020. "Fostering participation in digital public health interventions: The case of digital contact tracing," ZEW Discussion Papers 20-076, ZEW - Leibniz Centre for European Economic Research.
    19. Wenzel, Tobias, 2024. "Collusion, inattentive consumers and shrouded prices," Journal of Economic Behavior & Organization, Elsevier, vol. 218(C), pages 579-591.
    20. Helia Marreiros & Mirco Tonin & Michael Vlassopoulos & M.C. Schraefel, 2016. "“Now that you mention it”: A Survey Experiment on Information, Salience and Online Privacy," BEMPS - Bozen Economics & Management Paper Series BEMPS34, Faculty of Economics and Management at the Free University of Bozen.

    More about this item

    Keywords

    Data protection; Loss aversion; Investment incentives; Regulation;
    All these keywords.

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecolet:v:195:y:2020:i:c:s0165176520302846. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ecolet .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.