Restrictions on Privacy and Exploitation in the Digital Economy: A Market Failure Perspective

Journal of Competition Law and Economics, Forthcoming

NET Institute Working Paper No. #20-05

74 Pages Posted: 9 Sep 2020

See all articles by Nicholas Economides

Nicholas Economides

New York University - Leonard N. Stern School of Business - Department of Economics

Ioannis Lianos

University College London - Faculty of Laws; BRICS Competition Law & Policy Centre - HSE National Research University

Date Written: September 4, 2020

Abstract

We discuss how the acquisition of private information by default without compensation by digital platforms such as Google and Facebook creates a market failure and can be grounds for antitrust enforcement. To avoid the market failure, the default in the collection of personal information has to be changed by law to “opt-out.” This would allow the creation of a vibrant market for the sale of users’ personal information to digital platforms. Assuming that all parties are perfectly informed, users are better off in this functioning market and digital platforms are worse off compared to the default opt-in. However, just switching to a default opt-in will not restore competition to the but for world because of the immense market power and bargaining power towards an individual user that digital platforms have acquired. Digital platforms can use this power to reduce the compensation that a user would receive for his/her personal information compared to a competitive world. Additionally, it is likely that the digital platforms are much better informed than the user in this market, and can use this information to disadvantage users in the market for personal information.

Keywords: digital, privacy, restrictions of competition, exploitation, market failure, hold up, merger, unfair commercial practices, excessive data extraction, self-determination, behavioural manipulation, remedies, portability

JEL Classification: K21, L1, L12, L4, L41, L5, L86, L88

Suggested Citation

Economides, Nicholas and Lianos, Ioannis, Restrictions on Privacy and Exploitation in the Digital Economy: A Market Failure Perspective (September 4, 2020). Journal of Competition Law and Economics, Forthcoming, NET Institute Working Paper No. #20-05, Available at SSRN: https://ssrn.com/abstract=3686785 or http://dx.doi.org/10.2139/ssrn.3686785

Nicholas Economides (Contact Author)

New York University - Leonard N. Stern School of Business - Department of Economics ( email )

44 West 4th Street
New York, NY 10012
United States
212-998-0864 (Phone)
212-995-4218 (Fax)

HOME PAGE: http://www.stern.nyu.edu/networks/

Ioannis Lianos

University College London - Faculty of Laws ( email )

London
United Kingdom

BRICS Competition Law & Policy Centre - HSE National Research University ( email )

28/11, Shabolovka ulitsa
Moscow, 109028
Russia

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