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Privacy regulation and quality-enhancing innovation

Author

Listed:
  • Yassine Lefouili

    (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse)

  • Leonardo Madio

    (Unipd - Università degli Studi di Padova = University of Padua)

  • Ying Lei Toh

Abstract

We analyze how a privacy regulation taking the form of a cap on information disclosure affects quality-enhancing innovation incentives by a monopolist--who derives revenues solely from disclosing user data to third parties--and consumer surplus. If the share of privacy-concerned users is sufficiently small, privacy regulation has a negative effect on innovation and may harm users. However, if the share of privacy-concerned users is sufficiently large, privacy regulation has a positive effect on innovation. In this case, there is no trade-off between privacy and innovation and users always benefit from privacy regulation.

Suggested Citation

  • Yassine Lefouili & Leonardo Madio & Ying Lei Toh, 2024. "Privacy regulation and quality-enhancing innovation," Post-Print hal-04774302, HAL.
    • Handle: RePEc:hal:journl:hal-04774302
    DOI: 10.1111/joie.12374
    Note: View the original document on HAL open archive server: https://hal.science/hal-04774302v1
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    References listed on IDEAS

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