Data Linkages and Privacy Regulation
2026-07-29
We assess the efficacy of privacy regulation when consumers are privacy conscious. We develop a model of data linkages where a consumer interacts sequentially with two firms: One firm collects data on consumer behavior, and the other firm leverages the data to set a quality level and a price. A data linkage benefits the consumer in equilibrium when the recipient firm is sufficiently similar to the collecting firm. We endogenize linkage formation under several existing privacy regulations. Voluntary consent requirements benefit consumers in equilibrium, but blanket bans on discriminatory price and quality offers harm them. (JEL D11, D21, D82, D83)