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Privacy regulation in asymmetric environments

Author

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  • Shuaicheng Liu

    (Shanghai University of Finance and Economics)

Abstract

Around the world, strict privacy regulations are gradually being implemented, with the intended purpose of facilitating consumers to protect their privacy. This paper analyzes the unintended consequences of privacy regulations in the context of asymmetric data advantage. To this end, this paper constructs a model of behavior-based price discrimination, where one firm (such as the incumbent) possesses more data than the other (such as the entrant). The results demonstrate that stricter privacy regulation always benefits the data-advantaged firm. However, it has negative implications for both the data-disadvantaged firm and consumers in most cases. Furthermore, strict regulation leads to weakened competition and intensified mismatching. Therefore, this paper suggests a lenient regulatory policy.

Suggested Citation

  • Shuaicheng Liu, 2024. "Privacy regulation in asymmetric environments," Journal of Regulatory Economics, Springer, vol. 66(2), pages 157-173, December.
    • Handle: RePEc:kap:regeco:v:66:y:2024:i:2:d:10.1007_s11149-024-09478-1
    DOI: 10.1007/s11149-024-09478-1
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    More about this item

    Keywords

    Privacy regulation; Data asymmetry; Data acquisition; Data exploitation;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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