Privacy Regulation and Quality Investment

Présentation de Yassine Lefouili - TSE, UT1 Capitole

Yassine Lefouili, (TSE, UT1 Capitole)
En coll. avec Ying Lei Toho (Federal Bank of Kansas City).

Abstract: This paper analyzes how a privacy regulation restricting data disclosure affects quality investment by a monopoly service provider---who derives revenues solely from sharing user data with third parties---and social welfare. In our model, a user's gross utility from the service depends on its quality and the amount of information shared. We show that in a fully covered market, the regulation reduces quality investment but may still be socially desirable when quality and information are not strong complements.
In a partially covered market, the regulation may raise quality and social welfare even when quality and information are highly complementary.

Keywords: Privacy Regulation, Data Disclosure, Investment, Quality.
JEL Classification: D83, L15, L51.