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Does data protection legislation increase the quality of internet services?

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  • 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
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    References listed on IDEAS

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    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

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