Data-driven platforms collect and commercialize users’ data through advertisements or by selling the data to other third part providers. This practice raises the question of who should have the right to decide which data to collect and commercialize, users or the platform? In this article, we describe the results of our research concerning regulating platforms’ data collection. The main feature of our research is the distinction between the user’s private benefit from data and the data’s public benefit—i.e., the benefit a user’s data provide to other users on the platform, regardless of whether they are sharing their data. We find that when users differ in their disutility from the commercialization of their data and the public benefit of data is high (low), it is welfare enhancing to let the platform (users) control the data. In contrast, when heterogeneity is in the disutility from the commercialization of different data items, it is welfare enhancing to let users (the platform) control the data when the public benefit of data is high (low). Furthermore, we find that an entrant platform may choose to give users control over their data as doing so can help it overcome the advantage the incumbent enjoys.
By Sarit Markovich & Yaron Yehezkel
Many platforms base their business model on the commercialization of their users’ data. For example, search engines, such as Google, can collect data on users’ location and keywor...