Abstract
We analyze how a privacy regulation taking the form of a cap on information disclosure affects quality-enhancing innovation incentives by a monopolist--who derives revenues solely from disclosing user data to third parties--and consumer surplus. If the share of privacy-concerned users is sufficiently small, privacy regulation has a negative effect on innovation and may harm users. However, if the share of privacy-concerned users is sufficiently large, privacy regulation has a positive effect on innovation. In this case, there is no trade-off between privacy and innovation and users always benefit from privacy regulation.
Keywords
Privacy Regulation; Data Disclosure; Innovation;
JEL codes
- D83: Search • Learning • Information and Knowledge • Communication • Belief
- L15: Information and Product Quality • Standardization and Compatibility
- L51: Economics of Regulation
Replaces
Yassine Lefouili, Leonardo Madio, and Ying Lei Toh, “Privacy Regulation and Quality-Enhancing Innovation”, TSE Working Paper, n. 17-795, April 2017, revised July 2023.
Reference
Yassine Lefouili, Leonardo Madio, and Ying Lei Toh, “Privacy Regulation and Quality-Enhancing Innovation”, The Journal of Industrial Economics, vol. 72, n. 2, June 2024, pp. 662–684.
See also
Published in
The Journal of Industrial Economics, vol. 72, n. 2, June 2024, pp. 662–684