Standing on the Shoulders of Web Giants: The Economic Effects of Personal Data Brokers

72 Pages Posted: 16 Mar 2018 Last revised: 9 Dec 2020

See all articles by Bastian Haberer

Bastian Haberer

University of Passau

Jan Kraemer

University of Passau; Center on Regulation in Europe (CERRE)

Daniel Schnurr

University of Passau

Date Written: December 7, 2020

Abstract

In several jurisdictions, like the European Union and California, consumers now have a legal right to port the data that a company has collected about them to another service. This has spurred the emergence of personal data brokers (PDBs), which offer consumers financial rewards for access to their personal data collected by large online content and service providers (CSPs). Using a game-theoretic model, we investigate how PDBs affect market outcomes in the data economy and under which conditions users will indeed benefit from them. Across several model variants, we find that in markets with a PDB two main equilibrium outcomes exist. First, a minimum income equilibrium can arise, where the PDB only pays a minimal reward, and the CSP lowers its service quality in the long run, leaving consumers worse off than without a PDB. Second, a positive income equilibrium can arise, where the PDB pays significant rewards to consumers, and the CSP’s quality may be higher or lower depending on the PDB's efficiency on the data market. Whether consumers are better off in this equilibrium depends on the relative strengths of three effects that we characterize formally and denote as competition effect, displacement effect, and appropriation effect. Consumers will only benefit from a PDB if it can sell their data efficiently; but in this case, the CSP will also demand a higher (non-zero) price for using its service. Thus, our results bear important managerial and policy implications for data-driven business models and the regulation of data access and portability.

Keywords: personal data markets, data portability, information intermediaries, quality of online services, data-driven business models

Suggested Citation

Haberer, Bastian and Kraemer, Jan and Schnurr, Daniel, Standing on the Shoulders of Web Giants: The Economic Effects of Personal Data Brokers (December 7, 2020). TPRC 46: The 46th Research Conference on Communication, Information and Internet Policy 2018, Available at SSRN: https://ssrn.com/abstract=3141946 or http://dx.doi.org/10.2139/ssrn.3141946

Bastian Haberer (Contact Author)

University of Passau ( email )

Dr.-Hans-Kapfinger-Str. 12
Passau, 94032
Germany

Jan Kraemer

University of Passau ( email )

Chair of Internet and Telecommunications Business
Dr.-Hans-Kapfinger-Str. 12
Passau, D-94036
Germany
+498515092580 (Phone)
+498525092582 (Fax)

HOME PAGE: http://www.kraemer.biz

Center on Regulation in Europe (CERRE) ( email )

Rue de l'Industrie 42
Brussels, 1040
Belgium

Daniel Schnurr

University of Passau ( email )

Dr.-Hans-Kapfinger-Str. 12
Passau, 94032
Germany

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