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Saturday, September 9 • 2:33pm - 3:05pm
Privacy, Information Acquisition, and Market Competition

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This paper analyzes how personal information affects market outcomes in a two-sided market where sellers target advertisements to individuals who have varying privacy concerns. I focus on how a market entrant that has worse targeting technology than an incumbent is disproportionately affected by a lack of information. I show that an entrant always purchases data to overcome its initial targeting disadvantage, whereas the incumbent only does so when consumers are relatively privacy-sensitive. When the incumbent also buys data, the entrant suffers from lower market share. With regard to data-driven vertical integration between the platform and a seller, the platform and incumbent will merge if consumers become more privacy-sensitive, and they will always prevent the unaffiliated entrant from obtaining data access. Overall, an entrant is disproportionately affected by consumers' privacy concerns. The welfare analysis shows that privacy concerns and the resulting market outcomes lower consumer surplus and social welfare. Therefore, individually optimal decisions on data disclosure might not be socially optimal when aggregated.


Jesse Sowell

Senior Advisor, Vice Chair of GDC Directing Outreach, Cybersecurity Fellow, M3AAWG / Stanford


Soo Jin Kim

Michigan State University

Saturday September 9, 2017 2:33pm - 3:05pm EDT
ASLS Hazel Hall - Room 225