We investigate how the presence of a Data Broker (DB), who sells consumer data to downstream firms, affects firm entry and competition in a horizontally differentiated oligopoly market, in which data allow firms to price discriminate. The DB chooses the price and amount of data sold to each firm. We show that the data sale by theDB reduces excessive market entry, as the competition induced by personalized prices exerts a downward pressure on prices and profits. The data-induced entry barrier and resulting weakened competition dominates the pro-competitive effect of personalized prices. Consequently, while the DB’s presence might alleviate excessive market entry, it also diminishes consumer surplus.

User data and endogenous entry in online markets / Abrardi, Laura; Cambini, Carlo; Congiu, Raffaele; Pino, Flavio. - In: JOURNAL OF INDUSTRIAL ECONOMICS. - ISSN 0022-1821. - ELETTRONICO. - (2024). [10.1111/joie.12383]

User data and endogenous entry in online markets

Abrardi, Laura;Cambini, Carlo;Congiu, Raffaele;Pino, Flavio
2024

Abstract

We investigate how the presence of a Data Broker (DB), who sells consumer data to downstream firms, affects firm entry and competition in a horizontally differentiated oligopoly market, in which data allow firms to price discriminate. The DB chooses the price and amount of data sold to each firm. We show that the data sale by theDB reduces excessive market entry, as the competition induced by personalized prices exerts a downward pressure on prices and profits. The data-induced entry barrier and resulting weakened competition dominates the pro-competitive effect of personalized prices. Consequently, while the DB’s presence might alleviate excessive market entry, it also diminishes consumer surplus.
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11583/2925535