The bright side of the GDPR: Welfare-improving privacy management
Choe,Chongwoo Matsushima,Noriaki Shekhar,Shiva
Choe,Chongwoo
Matsushima,Noriaki
Shekhar,Shiva
Abstract
We study the GDPR's opt-in requirement in a model with a firm that provides a digital service and consumers who are heterogeneous in their valuations of the firm's service as well as the privacy costs incurred when sharing personal data with the firm. We show that the GDPR boosts demand for the service by allowing consumers with high privacy costs to buy the service without sharing data. The increased demand leads to a higher price but a smaller quantity of shared data. If the firm's revenue is largely usage-based rather than data-based, then both the firm's profit and consumer surplus increase after the GDPR, implying that the GDPR can be welfare-improving. But if the firm's revenue is largely from data monetization, then the GDPR can reduce the firm's profit and consumer surplus.
Description
Date
2023-08-14
Journal Title
Journal ISSN
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Publisher
TILEC
Research Projects
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Keywords
GDPR, opt-in, opt-out, privacy management, welfare, D18 - Consumer Protection, D61 - Allocative Efficiency ; Cost–Benefit Analysis, K24 - Cyber Law, L12 - Monopoly ; Monopolization Strategies, L51 - Economics of Regulation, L86 - Information and Internet Services ; Computer Software
Citation
Choe, C, Matsushima, N & Shekhar, S 2023 'The bright side of the GDPR : Welfare-improving privacy management' TILEC Discussion Paper, vol. 2023-15, TILEC, Tilburg. https://doi.org/10.2139/ssrn.4537982