Data-Driven Predatory Entry with Privacy-Policy Tying
17 Pages Posted: 9 Jun 2020
Date Written: May 13, 2020
We present a theory of predatory entry by means of privacy-policy tying, which we define as conditioning the provision of services to the subscription of a privacy-policy that allows bundling of user data across unrelated services. We show how a firm with market power in a primary market can enter a data-ripe target market and offer below-cost prices in order to gain a data advantage. This advantage shields the dominant firm in the primary market from entry by more efficient competitors serving the target market. Consumer surplus typically decreases as a result. We discuss potential remedies, such as data unbundling.
Keywords: Entry-Deterrence, Predatory Pricing, Platform Envelopment, User Data, Privacy-Policy Tying
JEL Classification: L12, L41
Suggested Citation: Suggested Citation