Inflation Expectations of Decision-makers and Their Management

This research will investigate the value that the data of a consumer has for the firm
that uses it. In many digital platforms, consumer data is often used to intermediate the
needs of various agents with conflicting interests—such as buyers and sellers, drivers and
riders, or social-media users and advertisers. This makes determining the value of data
especially complex. This research will tackle such complexity to provide a more complete
account of the value of data—especially its dependence on privacy-protection policies.
By doing so, it will advance our understanding of the demand for data in the digital
economy and provide insights into how data markets work and may be affected by policy
interventions. This research will also shed light on the debate about how to individually
compensate consumers for their data, which many scholars and policymakers believe to
be an essential aspect of a functioning data market.

More specifically, this research project will study what determines the value of a single
data record for the intermediary that uses it as an input in its business. For instance,
such a record can be the characteristics of a buyer that an e-commerce platform stores
on its servers. When data is used by a third party (like a platform) to strategically
direct interactions between multiple agents (like buyers and sellers), assessing its value is
complicated and calls for a new approach. The project shows that this value is not just the
payoff the intermediary derives directly from a record (like a platform’s transaction fees).
It involves other components, which can significantly bias our assessments if ignored.
They capture externalities between the records of, say, different buyers not because of a
statistical correlation, but because of how the platform partitions its knowledge of the
buyers so as to direct sellers’ responses (e.g., by pooling buyers into market segments).
Such externalities can render the record of a low-spending buyer more valuable than
that of a high-spending buyer. The first part of the project will study contexts where
the intermediary already owns the data and can use it without people’s consent. Its
core contribution is to show how to properly assess the value of individual records and
characterize all its components. The second part of the project will study how the value
of data changes when each consumer can withhold their data from the platform. One key
insight is that privacy rights may not only shift wealth from data-users to data-sources
(i.e., from intermediaries to consumers), but also change the value of data records itself.
For instance, it can increase the value of some people’s records at the expense of others.
Thus, privacy can have redistributive effects across data-sources, which may contribute
to social inequality and should be taken into account by privacy-protection policies.