Working Paper: NBER ID: w26260
Authors: Charles I. Jones; Christopher Tonetti
Abstract: Data is nonrival: a person’s location history, medical records, and driving data can be used by any number of firms simultaneously. Nonrivalry leads to increasing returns and implies an important role for market structure and property rights. Who should own data? What restrictions should apply to the use of data? We show that in equilibrium, firms may not adequately respect the privacy of consumers. But nonrivalry leads to other consequences that are less obvious. Because of nonrivalry, there may be large social gains to data being used broadly across firms, even in the presence of privacy considerations. Fearing creative destruction, firms may choose to hoard data they own, leading to the inefficient use of nonrival data. Instead, giving the data property rights to consumers can generate allocations that are close to optimal. Consumers balance their concerns for privacy against the economic gains that come from selling data to all interested parties.
Keywords: Data; Nonrivalry; Economics; Privacy; Property Rights
JEL Codes: E0; O4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Firm Ownership (L20) | Inadequate Respect for Consumer Privacy (D18) |
| Nonrivalry in Data Usage (D16) | Enhanced Economic Efficiency (D61) |
| Data Hoarding by Firms (D26) | Inefficient Data Use (Y10) |
| Consumer Ownership of Data Rights (P14) | Optimized Allocations (D61) |