Privacy Regulation and Innovation Policy

51 Pages Posted: 25 Oct 2019 Last revised: 16 Jan 2020

See all articles by Yafit Lev Aretz

Yafit Lev Aretz

City University of New York (CUNY) - Department of Law

Katherine J. Strandburg

New York University School of Law

Date Written: October 28, 2019


Industry players and opponents of privacy regulation claim broadly that privacy regulation will “stifle” innovation. This Article responds by bringing together traditional theories of regulation and innovation policy, and applying them in the context of markets involving personal information. Dire predictions about regulation’s impact on innovation are common in many arenas, but seem to hold particularly great policy sway with regard to information privacy regulation. Here, we seek to bring analytical clarity to the debate about information privacy regulation, by showing how the interplay between misaligned demand signals in personal information markets and failures of supplier appropriability jointly determine the market’s innovation portfolio.

Our analysis suggests that the characteristics of personal data do entangle some sorts of privacy regulation with appropriability in ways that can affect innovation incentives. Privacy regulation’s possible effects on innovation do not justify blanket opposition, however, because they depend on details of regulatory design. Moreover, some sorts of privacy regulation designed to address misaligned market demand signals can potentially mitigate failures of appropriability and provide a more socially beneficial portfolio of innovation incentives. Proposals for information privacy regulations should thus be judged on their individual merits, taking both misaligned market demand signals and failures of appropriability into account.

Keywords: privacy, innovation, regulation, competition, platform

JEL Classification: K2

Suggested Citation

Lev Aretz, Yafit and Strandburg, Katherine J., Privacy Regulation and Innovation Policy (October 28, 2019). Forthcoming 22 Yale J. Law and Tech. __ (2020), NYU Law and Economics Research Paper No. 19-45, NYU School of Law, Public Law Research Paper No. 19-53, Available at SSRN:

Yafit Lev Aretz

City University of New York (CUNY) - Department of Law ( email )

New York, NY
United States
9178891136 (Phone)

HOME PAGE: http://

Katherine J. Strandburg (Contact Author)

New York University School of Law ( email )

40 Washington Square South
New York, NY 10012-1099
United States

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