Nonrivalry and the Economics of Data

53 Pages Posted: 18 Sep 2019 Last revised: 26 Sep 2019

See all articles by Charles I. Jones

Charles I. Jones

Stanford Graduate School of Business; National Bureau of Economic Research (NBER)

Christopher Tonetti

Stanford University

Date Written: September 2019

Abstract

Data is nonrival: a person's location history, medical records, and driving data can be used by any number of firms simultaneously. Nonrivalry leads to increasing returns and implies an important role for market structure and property rights. Who should own data? What restrictions should apply to the use of data? We show that in equilibrium, firms may not adequately respect the privacy of consumers. But nonrivalry leads to other consequences that are less obvious. Because of nonrivalry, there may be large social gains to data being used broadly across firms, even in the presence of privacy considerations. Fearing creative destruction, firms may choose to hoard data they own, leading to the inefficient use of nonrival data. Instead, giving the data property rights to consumers can generate allocations that are close to optimal. Consumers balance their concerns for privacy against the economic gains that come from selling data to all interested parties.

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Suggested Citation

Jones, Charles I. and Tonetti, Christopher, Nonrivalry and the Economics of Data (September 2019). NBER Working Paper No. w26260. Available at SSRN: https://ssrn.com/abstract=3454361

Charles I. Jones (Contact Author)

Stanford Graduate School of Business ( email )

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National Bureau of Economic Research (NBER)

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Christopher Tonetti

Stanford University ( email )

Stanford, CA 94305
United States

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