Is Data Ownership Empowerment Welfare-Enhancing?

Abstract

Under current business models, consumers have to hand over their personal data to “digital giants” in exchange for high-quality services. Should consumers be empowered to have ownership towards the data they generated through their own actions in the platform firm’s site? New technologies emerge to empower consumers to control their own data, and the platform firm may need to compensate for the usage of consumers’ private data. How consumers and the firm should react to such data ownership empowerment policy, however, is not clear. We build a theoretical model in which consumers have different sensitivities to the loss of data ownership. We show that the impact of data ownership empowerment depends not only on the firm’s revenue structure, but also on consumers’ need for customized services. The results of the welfare analysis offer managerial implications for policy making.