The Platform Dimension of Digital Privacy

Recent advancements in economic theory explore the practices of large digital platforms in terms of data collection from individual users and their monetization strategies through targeted advertising. Of particular interest is the platform dimension of digital privacy, whereby the actions and behaviors of all users and advertisers influence the amount and the precision of the information available about each user. The acquisition of such information by platforms is facilitated by the presence of data externalities that stem from the correlation in preferences among different users. Balancing consumer privacy and product-market competition is challenging, as platforms strategically utilize their data not only to enhance the quality of matches but also to bolster advertisers’ market power. These findings highlight the complex relationship between privacy, regulation, and competition.