Job market paper
This paper studies optimal mechanisms for collecting and trading data. Consumers benefit from revealing information about their taste to a service provider because this improves the service. However, the information is also valuable to a third party as it may extract more revenue from the consumer in another market called the product market. The paper characterizes the constrained optimal mechanism for the service provider subject to incentive feasibility. It is shown that the service provider sometimes sells no information or only partial information in order to preserve profits in the service market. Moreover, a ban on data trade may reduce social welfare because it makes it harder to price discriminate in the product market.
FieldsMicroeconomic theory, Information economics, Industrial organization, Financial Economics
Competing for Consumers Attention (Draft available upon request)