The Economics of Social Data

65 Pages Posted: 25 Mar 2020

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 2020

Abstract

A data intermediary pays consumers for information about their preferences and sells the information so acquired to firms that use it to tailor their products and prices. The social dimension of the individual data---whereby an individual's data are predictive of the behavior of others---generates a data externality that reduces the intermediary's cost of acquiring information. We derive the intermediary's optimal data policy and show that it preserves the privacy of the consumers' identities while providing precise information about market demand to the firms. This enables the intermediary to capture the entire value of information as the number of consumers grows large.

Keywords: consumer privacy, data externality, data flow, data intermediaries, data policy, data rights, personal information, privacy paradox, social data

JEL Classification: D44, D82, D83

Suggested Citation

Bergemann, Dirk and Bonatti, Alessandro and Gan, Tan, The Economics of Social Data (March 2020). CEPR Discussion Paper No. DP14466, Available at SSRN: https://ssrn.com/abstract=3560273

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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