The Economics of Social Data

57 Pages Posted: 27 Sep 2019 Last revised: 29 Sep 2022

See all articles by Dirk Bergemann

Dirk Bergemann

Yale University - Cowles Foundation - Department of Economics; Yale University - Cowles Foundation

Alessandro Bonatti

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Tan Gan

Yale University - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: September 25, 2019

Abstract

A data intermediary acquires signals from individual consumers regarding their preferences. The intermediary resells the information in a product market wherein firms and consumers tailor their choices to the demand data. The social dimension of the individual data---whereby a consumer's data are predictive of others' behavior---generates a data externality that can reduce the intermediary's cost of acquiring the information. The intermediary optimally preserves the privacy of consumers' identities if and only if doing so increases social surplus. This policy enables the intermediary to capture the total value of the information as the number of consumers becomes large.

Keywords: Social data, Personal information, Consumer privacy, Privacy paradox, Data intermediaries, Data externality, Data flow, Data policy, Data rights

JEL Classification: D44, D82, D83

Suggested Citation

Bergemann, Dirk and Bonatti, Alessandro and Gan, Tan, The Economics of Social Data (September 25, 2019). Bergemann, D., Bonatti, A. and Gan, T. (2022), The economics of social data. The RAND Journal of Economics, 53: 263-296., Available at SSRN: https://ssrn.com/abstract=3459796 or http://dx.doi.org/10.2139/ssrn.3459796

Dirk Bergemann (Contact Author)

Yale University - Cowles Foundation - Department of Economics ( email )

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HOME PAGE: http://www.econ.yale.edu/~dirk/

Yale University - Cowles Foundation

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Alessandro Bonatti

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
E62-416
Cambridge, MA 02142
United States

Tan Gan

Yale University - Department of Economics ( email )

28 Hillhouse Ave
New Haven, CT 06520-8268
United States

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