Privacy Risk is a Function of Information Type: Learnings for the Surveillance Capitalism Age

Abstract

In-app advertising is a multi-billion dollar industry that is an essential part of the current digital ecosystem, and is amenable to sensitive consumer information often being sold downstream without the knowledge of consumers, and in many cases to their annoyance. While this practice, in cases, may result in long-term benefits for the consumers, it can result in serious information privacy (IP) breaches of very significant impact (e.g., breach of genetic data) in the short term. The question we raise through this article is: does the type of information being traded downstream play a role in the degree of IP risks generated? We investigate two general (one-many) information trading market structures between a single data aggregating seller (e.g., enterprise app) and multiple competing buyers (e.g., ad-networks, retailers), distinguished by mutually exclusive and privacy sanitized aggregated consumer data (information) types: (i) data entailing strategically complementary actions among buyers and (ii) data entailing strategically substituting actions among buyers. Our primary question of interest here is: trading which type of data might pose less information privacy risks for society? To this end, we show that at market equilibrium IP trading markets exhibiting strategic substitutes between buying firms pose lesser risks for IP in society, primarily because the `substitutes' setting, in contrast to the `complements' setting, economically incentivizes appropriate consumer data distortion by the seller in addition to restricting the proportion of buyers to which it sells. Moreover, we also show that irrespective of the data type traded by the seller, the likelihood of improved IP in society is higher if there is purposeful or free-riding based transfer/leakage of data between buying firms. This is because the seller finds itself economically incentivized to restrict the release of sanitized consumer data with respect to the span of its buyer space, as well as in improved data quality.