Consumer Control of Personal Data: Too Late, Chums
September 3, 2020
“The Economics of Social Data” is an interesting write up by a Yale graduate student (how much time did you put into this work, Tan Gan?), a Yale professor (George Bush’s stomping grounds), and an MIT professor (yes, the outfit that accepted money from an alleged human trafficker and then stumbled through truth thickets).
What did these esteemed individuals discover? I like this sentence:
Platforms focuses on ensuring consumers’ control over their individual data. Regulators hope that ownership and control over one’s own data will result in appropriate compensation for the data one chooses to reveal. However, economists need to consider the social aspect of data collection. Because an individual user’s data is predictive of the behavior of others, individual data is in practice social data. The social nature of data leads to an externality: an individual’s purchase on Amazon, for example, will convey information about the likelihood of purchasing a certain product among other consumers with similar purchase histories.
Does this imply that a light bulb has flickered to life in the research cubbies of these influential scholars? Let’s grind forward:
While consumers can experience positive externalities, such as real-time traffic information, very little curbs the platform from trading data for profit in ways that harm consumers. Therefore, data ownership is insufficient to bring about the efficient use of information, since arbitrarily small levels of compensation can induce a consumer to relinquish her personal data.
Remember. I reside in rural Kentucky and most of my acquaintances go bare foot or wear work boots. It seems that after decades of non-regulation, governmental hand waving, and sitting on the porch watching monopolies thrive — a problem?
The fix? Here you go:
In terms of policy implications, our results on the aggregation of consumer information suggest that privacy regulation must move away from concerns over personalized prices at the individual level. Most often, firms do not set prices in response to individual-level characteristics. Instead, segmentation of consumers occurs at the group level (e.g. as in the case of Uber) or at the temporal and spatial levels (e.g. Staples, Amazon). Thus, our analysis points to the significant welfare effects of group-based price discrimination and of uniform prices that react in real time to changes in market-level demand.
Translation: Too late, chums.
Stephen E Arnold, September 3, 2020
Comments
-
- Subscribe to Beyond Search
Feature archive
News archive
-
