We provide a theoretical model of privacy in which data collection requires consumers' consent and consumers are fully aware of the consequences of such consent. Nonetheless, excessive collection of personal information arises in the monopoly market equilibrium which results in excessive loss of privacy compared to the social optimum. The main mechanism for this result is information externalities and users' coordination failure in which some users' decision to share their personal information may allow the data controller to infer more information about non-users. We also show that the emergence of data brokerage industry can facilitate the collection and monetization of users' personal data even in a fragmented market where no individual website has incentives to do so independently due to scale economies in data analytics. We discuss policy implications of our analysis in light of the recent EU General Data Protection Regulation (GDPR).
We study how net neutrality regulations affect a high-bandwidth content provider (CP)'s investment incentives to enhance its quality of services in content delivery to end users. We find that the effects crucially depend on whether the CP's entry is constrained by the Internet service provider's network capacity. If the capacity is relatively large, the prioritization reduces the investment as CP's investment and prioritization form substitutes. With limited capacity, however, they become complements and the prioritization can facilitate the entry of congestion-sensitive content. Our analysis suggests that the optimal policy may call for potentially asymmetric regulations across mobile and fixed networks. * We thank
Two major criteria of distributive justice are the utilitarian criterion and the maximin criterion. We offer a simple axiomatic characterization of a mixed utilitarian-maximin social welfare function. This social welfare function explains recent empirical violations of the standard cardinal social choice theory such as the social Allais paradox and the social common ratio effect. In addition, it offers a new foundation for the positively skewed wealth distributions in society. It also provides an objective function for mechanism design applications that trades off maximizing surplus and minimizing inequality.
We examine the underlying economics behind the emerging issue of the so-called "right to be forgotten," which subsumes the right for individuals to ask for 'inadequate, irrelevant or no longer relevant, or excessive' information about them to be dropped from Internet searches. At stake is the conflict between the privacy right and other fundamental rights such as the freedom of speech, expression, and access to information. First, we analyze a legal dispute game between a petitioner, claiming the right to be forgotten, and an Internet search engine. In particular, we characterize conditions under which litigation arises as an equilibrium outcome. Then we provide comparative static results on the probability of lawsuits and the likelihood of broken-links, in connection to the social value of information. Our model offers a useful framework in understanding the effects of Europe's expansion of the right to be forgotten to non-European websites: If the European ruling applies to all global search engine domains, then the expected amount of broken-links would fall.
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