Data-Driven Envelopment with Privacy-Policy Tying

Senior Managing Director, Jorge Padilla, co-authored an article for the Economic Journal alongside academic affiliate, Daniele Condorelli, presenting a theory of monopoly protection by means of entry in adjacent markets that have a common customer base.

Abstract

We present a theory of monopoly protection by means of entry in adjacent markets that have a common customer base (i.e., envelopment). A firm dominant in its market enters a data-rich secondary market and engages in predatory pricing and privacy-policy tying. We define the latter as conditioning service provision to the subscription of a privacy-policy that allows bundling of user data across all sources. Acquiring data from the secondary market confers an advantage in the data-intensive primary market that shields the dominant firm from entry, thus harming consumers. We discuss potential remedies, including data unbundling and portability.

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This article was originally published by the Economic Journal here. The views expressed in this paper are the sole responsibility of the author and cannot be attributed to Compass Lexecon or any other parties.