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Privacy Regulation and Quality-Enhancing Innovation

Author

Listed:
  • Yassine Lefouili

    (Toulouse School of Economics)

  • Leonardo Madio

    (University of Padova and CESifo)

  • Ying Lei Toh

    (Federal Reserve Bank of Kansas City)

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, 2023. "Privacy Regulation and Quality-Enhancing Innovation," "Marco Fanno" Working Papers 0298, Dipartimento di Scienze Economiche "Marco Fanno".
    • Handle: RePEc:pad:wpaper:0298
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    References listed on IDEAS

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    Cited by:

    1. Chiara Conti & Pierfrancesco Reverberi, 2019. "Price discrimination and product quality under opt-in privacy regulation," DIAG Technical Reports 2019-07, Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza".
    2. Conti, Chiara & Reverberi, Pierfrancesco, 2021. "Price discrimination and product quality under opt-in privacy regulation," Information Economics and Policy, Elsevier, vol. 55(C).
    3. Jin, Ginger Zhe & Wagman, Liad, 2021. "Big data at the crossroads of antitrust and consumer protection," Information Economics and Policy, Elsevier, vol. 54(C).
    4. Loertscher, Simon & Marx, Leslie M., 2020. "Digital monopolies: Privacy protection or price regulation?," International Journal of Industrial Organization, Elsevier, vol. 71(C).
    5. 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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    More about this item

    Keywords

    Privacy Regulation; Data Disclosure; Innovation;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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