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Regulating a Social Media Platform in the Data Economy

Author

Listed:
  • Goonj Mohan

    (Universitat de Barcelona)

Abstract

This paper studies regulation of a social media platform (SMP). I consider a user network with data externalities and an SMP that earns revenue from data-based personalized advertising. The SMP offers a price for user data and users simultaneously accept or reject the offer. Under a microfounded model I show that sharing moderate amount of user data maximizes user welfare. However, externalities reduce price for data and all data is shared in equilibrium. A strict consent policy like GDPR overcorrects this imbalance, burdens users with complete data-control and decreases user welfare. Data minimization moderately shifts data-control to users and increases user welfare.

Suggested Citation

  • Goonj Mohan, 2024. "Regulating a Social Media Platform in the Data Economy," UB School of Economics Working Papers 2024/477, University of Barcelona School of Economics.
    • Handle: RePEc:ewp:wpaper:477web
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    File URL: https://hdl.handle.net/2445/217265
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    More about this item

    Keywords

    Bayesian signalling; data; social media platform; user welfare;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L88 - Industrial Organization - - Industry Studies: Services - - - Government Policy

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