Industrial Data Sharing and Data Readiness: A Law and Economics Perspective

Forthcoming in: European Journal of Law and Economics

Max Planck Institute for Innovation & Competition Research Paper No. 23-22

28 Pages Posted: 7 Nov 2023 Last revised: 11 Nov 2023

See all articles by Nathalie Jorzik

Nathalie Jorzik

Heidelberg University

Paljana Kirchhof

University of the German Federal Armed Forces - Universität der Bundeswehr München

Frank Mueller-Langer

University of the Bundeswehr Munich; Max Planck Institute for Innovation and Competition; European Commission, Joint Research Center

Date Written: October 19, 2023

Abstract

We study the incentives and welfare properties of industrial data sharing taking into account the data (economy) readiness of companies. We differentiate between two regulatory settings. First, there is no compulsionfor companies to provide data. Companies, which also use the data for other corporate purposes, decide whether to share their data voluntarily. Second, there is a regulatory requirement on the minimum amount of data to be shared by the data provider. We assume that data sharing affects the data provider’s value of the data. The magnitude and sign of this effect have an impact on the optimal investment level of data generation and overall welfare in the different cases under study. Our results suggest that the implementation of a data-sharing policy has ambiguous welfare properties. It has positive welfare properties if (a) the data receiving firm does not pay too much for the data, (b) the data receiving firm benefits enough from the data provider’s data generating effort, and (c) the intensified competition due to data sharing is not too harmful to the data provider. In contrast, it will always have negative welfare properties if the data provider’s minimum amount of data to be shared under the policy is prohibitively high such that no data is created in the first place. Our results also suggest that a positive effect of data sharing on the data-generating company’s value of the data and its data economy readiness positively affect the incentives to share data. Finally, we find that data sharing under a data-sharing policy leads to a lower data quality if the data economy readiness of the data-generating company is too low.

Keywords: Industrial data sharing, data readiness, welfare effects

JEL Classification: L11, L12, K20

Suggested Citation

Jorzik, Nathalie and Kirchhof, Paljana and Mueller-Langer, Frank, Industrial Data Sharing and Data Readiness: A Law and Economics Perspective (October 19, 2023). Forthcoming in: European Journal of Law and Economics, Max Planck Institute for Innovation & Competition Research Paper No. 23-22, Available at SSRN: https://ssrn.com/abstract=4607090 or http://dx.doi.org/10.2139/ssrn.4607090

Nathalie Jorzik

Heidelberg University ( email )

Grabengasse 1
Heidelberg, 69117
Germany

Paljana Kirchhof

University of the German Federal Armed Forces - Universität der Bundeswehr München ( email )

Werner-Heisenberg-Weg 39
Neubiberg
Munich, 85579
Germany

Frank Mueller-Langer (Contact Author)

University of the Bundeswehr Munich ( email )

Munich
Germany

Max Planck Institute for Innovation and Competition ( email )

Munich
Germany

European Commission, Joint Research Center

Seville
Spain

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