Abstract
Data brokers share consumer data with rivals and, at the same time, compete with them for selling. We propose a “co-opetition” game of data brokers and characterise their optimal strategies. When data are “sub-additive” with the merged value net of the merging cost being lower than the sum of the values of individual datasets, data brokers are more likely to share their data and sell them jointly. When data are “super-additive”, with the merged value being greater than the sum of the individual datasets, competition emerges more often. Finally, data sharing is more likely when data brokers are more efficient at merging datasets than data buyers.
Highlights
In today’s highly digitised economy, data have become valuable and have attracted the attention of policymakers and institutions
We introduce a parameter α ∈ [0, 1] to index the Nash equilibria in the competitive subgame when data are downstream super-additive. α captures the data brokers’ belief about the share of the extra surplus assigned to DB2
Our model indicates that data sharing is most likely to arise when datasets present forms of substitutability and data brokers are more efficient than buyers in handling data
Summary
In today’s highly digitised economy, data have become valuable and have attracted the attention of policymakers and institutions. By merging sub-additive datasets, data brokers can avoid granting the buyer the discount that results from competition and reflects the overlapping information and the buyer’s merging cost. As a former partnership between Facebook and Acxiom suggests, a tech company may acquire information from data brokers, and the former can be more efficient in handling data, given its expertise and computational capabilities.3 In this case, the cost internalisation incentive is clearly not present. To ours, Ichihashi (2021) considers a setting in which data intermediaries compete to serve a downstream firm with consumer data He focuses on the welfare implications of data collection, whereas we explicitly study the incentives of data sharing and its implications for market actors. A microfoundation of the data structure and all proofs can be found in the Appendix
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