Ricerc@Sapienza

Thanks to significant advances in information technology, firms are increasingly able to collect and use a huge amount of personal data to segment markets in view of setting targeted prices and product offerings. The widespread availability of personal data has raised important privacy concerns, and the need for protecting consumers has prominently emerged in the public debate. In the EU, the awareness of privacy risks has led to the introduction of the General Data Protection Regulation (GDPR), which allows data subjects to manage personal data. Indeed, the collection and use of such data are allowed only after explicit consent of data subjects (opt-in regime).
In this context, it is of fundamental importance to assess the economic consequences of protecting personal information and analyse the effects of consumers¿ decisions regarding the trade-off associated with the privacy and the sharing of personal data.
The proposed research aims at investigating the effects of the new privacy regulation on firms¿ incentives to invest in R&D, innovation outcomes and consumers¿ welfare. Indeed, the opt-in regime makes it more difficult for firms to access consumers¿ data and infer their valuations for the products, thereby limiting the scope for price discrimination. As long as this reduces profits, it may also challenge the incentives to invest in product quality. Moreover, the provision of information may be insufficient when consumers¿ data at the aggregate level constitutes a fundamental input for the development of innovative products.
This study aims to shed light on the following issues: Does privacy regulation reducing the room for price discrimination come at the expense of product quality? Does enhanced privacy protection improve consumer surplus? Ultimately, should consumers be provided with more or less control over personal data?
Particular attention is devoted to the effects of regulation on heterogeneous consumers with different attitude towards privacy.