Data Union and Regulation in a Data Economy
In a model of data-driven firm competition, data are jointly produced by users, buying firms’ services and contributing data, and firms, investing in data infrastructure and collection. Data collection improves services, benefiting users, but may reduce competition, harming users. Dispersed users do not internalize the impact of their data contribution on (i) service quality, (ii) competition, and (iii) firms’ investment incentives, causing inefficient data over- or underinvestment. Unlike data sharing, user privacy protection policies, or data markets, a data union — which coordinates users’ data contributions — or data trust — which intermediates data sales — can address these inefficiencies.
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