Too Much Data: Prices and Inefficiencies in Data Markets

89 Pages Posted: 23 Sep 2019

See all articles by Daron Acemoglu

Daron Acemoglu

Massachusetts Institute of Technology (MIT) - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Ali Makhdoumi

Fuqua School of Business; Massachusetts Institute of Technology (MIT)

Azarakhsh Malekian

University of Toronto - Rotman School of Management; Massachusetts Institute of Technology (MIT) - Electrical Engineering and Computer Science

Asuman E. Ozdaglar

Massachusetts Institute of Technology (MIT) - Department of Electrical Engineering and Computer Science

Multiple version iconThere are 2 versions of this paper

Date Written: September 2019

Abstract

When a user shares her data with an online platform, she typically reveals relevant information about other users. We model a data market in the presence of this type of externality in a setup where one or multiple platforms estimate a user’s type with data they acquire from all users and (some) users value their privacy. We demonstrate that the data externalities depress the price of data because once a user’s information is leaked by others, she has less reason to protect her data and privacy. These depressed prices lead to excessive data sharing. We characterize conditions under which shutting down data markets improves (utilitarian) welfare. Competition between platforms does not redress the problem of excessively low price for data and too much data sharing, and may further reduce welfare. We propose a scheme based on mediated data-sharing that improves efficiency.

Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Suggested Citation

Acemoglu, Daron and Makhdoumi, Ali and Malekian, Azarakhsh and Ozdaglar, Asuman E., Too Much Data: Prices and Inefficiencies in Data Markets (September 2019). NBER Working Paper No. w26296, Available at SSRN: https://ssrn.com/abstract=3458221

Daron Acemoglu (Contact Author)

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

50 Memorial Drive
Room E52-380b
Cambridge, MA 02142
United States
617-253-1927 (Phone)
617-253-1330 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Ali Makhdoumi

Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States

HOME PAGE: http://https://www.fuqua.duke.edu/faculty/ali-makhdoumi

Massachusetts Institute of Technology (MIT) ( email )

77 Massachusetts Avenue
50 Memorial Drive
Cambridge, MA 02139-4307
United States

Azarakhsh Malekian

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

Massachusetts Institute of Technology (MIT) - Electrical Engineering and Computer Science ( email )

77 Massachusetts Avenue
Cambridge, MA 02139-4307
United States

Asuman E. Ozdaglar

Massachusetts Institute of Technology (MIT) - Department of Electrical Engineering and Computer Science ( email )

50 Memorial Drive
Cambridge, MA 02139-4307
United States
617-324-0058 (Phone)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
25
Abstract Views
204
PlumX Metrics