Document Type
Discussion Paper
Publication Date
9-1-2019
CFDP Number
2203R2
CFDP Revision Date
07/29/2020
CFDP Pages
71
Journal of Economic Literature (JEL) Code(s)
D44, D82, D83
Abstract
We propose a model of data intermediation to analyze the incentives for sharing individual data in the presence of informational externalities. A data intermediary acquires signals from individual consumers regarding their preferences. The intermediary resells the information in a product market in which firms and consumers can tailor their choices to the demand data. The social dimension of the individual data - whereby an individual’s data are predictive of the behavior of others - generates a data externality that can reduce the intermediary’s cost of acquiring information. We derive the intermediary’s optimal data policy and establish that it preserves the privacy of consumer identities while providing precise information about market demand to the firms. This policy enables the intermediary to capture the total value of the information as the number of consumers becomes large.
Recommended Citation
Bergemann, Dirk; Bonatti, Alessandro; and Gan, Tan, "The Economics of Social Data" (2019). Cowles Foundation Discussion Papers. 215.
https://elischolar.library.yale.edu/cowles-discussion-paper-series/215