The Economics of Social Data

59 Pages Posted: 5 Mar 2020 Last revised: 30 Apr 2021

See all articles by Dirk Bergemann

Dirk Bergemann

Yale University - Cowles Foundation - Department of Economics; Yale University - Cowles Foundation

Alessandro Bonatti

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Tan Gan

Yale University - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: March 2, 2020

Abstract

We propose a model of data intermediation to analyze the incentives for sharing individual data in the presence of informational externalities. A data intermediary acquires signals from individual consumers regarding their preferences. The intermediary resells the information in a product market
wherein firms and consumers can tailor their choices to the demand data. The social dimension of the individual data---whereby an individual's data are predictive of the behavior of others---generates a data externality that can reduce the intermediary's cost of acquiring the information. We
derive the intermediary's optimal data policy and establish that it preserves the privacy of consumer identities while providing precise information about market demand to the firms. This policy enables the intermediary to capture the total value of the information as the number of consumers becomes large.

Keywords: Social data, Personal information, Consumer privacy, Privacy paradox, Data intermediaries, Data externality, Data flow, Data policy, Data rights

JEL Classification: D44, D82, D83

Suggested Citation

Bergemann, Dirk and Bonatti, Alessandro and Gan, Tan, The Economics of Social Data (March 2, 2020). Cowles Foundation Discussion Paper No. 2203R, March 2020, Available at SSRN: https://ssrn.com/abstract=3548336 or http://dx.doi.org/10.2139/ssrn.3548336

Dirk Bergemann (Contact Author)

Yale University - Cowles Foundation - Department of Economics ( email )

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HOME PAGE: http://www.econ.yale.edu/~dirk/

Yale University - Cowles Foundation

Box 208281
New Haven, CT 06520-8281
United States

Alessandro Bonatti

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
E62-416
Cambridge, MA 02142
United States

Tan Gan

Yale University - Department of Economics ( email )

28 Hillhouse Ave
New Haven, CT 06520-8268
United States

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