Data-Driven Predatory Entry with Privacy-Policy Tying

17 Pages Posted: 9 Jun 2020

See all articles by Daniele Condorelli

Daniele Condorelli

University of Warwick - Department of Economics

Jorge Padilla

Compass Lexecon

Date Written: May 13, 2020

Abstract

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

Condorelli, Daniele and Padilla, Jorge, Data-Driven Predatory Entry with Privacy-Policy Tying (May 13, 2020). Available at SSRN: https://ssrn.com/abstract=3600725 or http://dx.doi.org/10.2139/ssrn.3600725

Daniele Condorelli (Contact Author)

University of Warwick - Department of Economics ( email )

Coventry CV4 7AL
United Kingdom

Jorge Padilla

Compass Lexecon ( email )

Paseo de la Castellana 7
Madrid, 28046
Spain

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