We analyze how a privacy regulation taking the form of a cap on information disclosure affects quality-enhancing innovation incentives by a monopolist--who derives revenues solely from disclosing user data to third parties--and consumer surplus. If the share of privacy-concerned users is sufficiently small, privacy regulation has a negative effect on innovation and may harm users. However, if the share of privacy-concerned users is sufficiently large, privacy regulation has a positive effect on innovation. In this case, there is no trade-off between privacy and innovation and users always benefit from privacy regulation.
Privacy Regulation, Data Disclosure, Innovation;
- D83: Search • Learning • Information and Knowledge • Communication • Belief
- L15: Information and Product Quality • Standardization and Compatibility
- L51: Economics of Regulation
Yassine Lefouili, Leonardo Madio, and Ying Lei Toh, “Privacy Regulation and Quality-Enhancing Innovation”, The Journal of Industrial Economics, 2023, forthcoming.
Yassine Lefouili, Leonardo Madio, and Ying Lei Toh, “Privacy Regulation and Quality-Enhancing Innovation”, TSE Working Paper, n. 17-795, April 2017, revised July 2023.
TSE Working Paper, n. 17-795, April 2017, revised July 2023