Abstract: 

We study the optimal design of competitive markets for personal data. In a data market, consumers own their data and sell it to a platform in exchange for a price and a service, which consists of being interacted with a third-party merchant, from whom they can buy a product. We study the equilibrium properties of this market and its ability to promote efficient data allocations. Our main result identifies a novel inefficiency that leads this otherwise perfectly competitive market to fail. We show how the underlying inefficiency critically depends on the platform’s role as an information intermediary. We then discuss three solutions to this market failure: establishing a data union, implementing data taxes, and allowing the price of data to depend on more than just the type of data being traded.

For further information please contact elisur.magrini@unibocconi.it