Consumer Privacy in Oligopolistic Markets: Winners, Losers, and Welfare

Abstract

Motivated by the unprecedented availability of consumer information on the Internet, we characterize the winners and losers from potential privacy regulation in the context of four commonly-used oligopoly models: a linear city model, a circular city model, a vertical differentiation model, and a multi-unit symmetric demand model. We show that while there are winners and losers as a result of privacy enforcement, the parties who stand to benefit and the parties who stand to lose, as well as whether social welfare is enhanced or diminished, largely depends on the specific economic setting under consideration.

Keywords: Privacy, Competition, Oligopoly, Consumer Information

JEL Classification: L13, D8, L5, L15, D43