Privacy Regulation and Market Structure
38 Pages Posted: 22 Dec 2010 Last revised: 18 Nov 2013
Date Written: 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.
Keywords: privacy, antitrust, regulation
JEL Classification: L40, L51, K20
Suggested Citation: Suggested Citation