Privacy Regulation and Market Structure
James David Campbell
Providence College; Brown University - Department of Economics
University of Toronto - Rotman School of Management
Catherine E. Tucker
Massachusetts Institute of Technology (MIT) - Management Science (MS)
August 15, 2013
This paper models how regulatory attempts to protect the privacy of consumers' data affect the competitive structure of data-intensive industries. Our results suggest that the commonly used consent-based approach may disproportionately benefit firms that offer a larger scope of services. Therefore, though privacy regulation imposes costs on all firms, it is small firms and new firms that are most adversely affected. We then show that this negative effect will be particularly severe for goods where the price mechanism does not mediate the effect, such as the advertising-supported internet.
Number of Pages in PDF File: 38
Keywords: privacy, antitrust, regulation
JEL Classification: L40, L51, K20
Date posted: December 22, 2010 ; Last revised: November 18, 2013
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