The Economics of Social Data

Résumé

We propose a model of data intermediation to analyze the incentives for sharing individual data in the presence of informational externalities. A data intermediary acquires signals from individual consumers regarding their preferences. The intermediary resells the information in a product market wherein firms and consumers can tailor their choices to the demand data. The social dimension of the individual dataó whereby an individualís data are predictive of the behavior of othersó generates a data externality that can reduce the intermediaryís cost of acquiring the information. We derive the intermediaryís optimal data policy and establish that it preserves the privacy of consumer identities while providing precise information about market demand to the firms. This policy enables the intermediary to capture the total value of the information as the number of consumers becomes large.