Collaborative Research: The Value of Data

This research will investigate the value that the data of a consumer has for the firm that uses it. In many digital platforms, consumer data is often used to intermediate the needs of various agents with conflicting interests—such as buyers and sellers, drivers and riders, or social-media users and advertisers. This makes determining the value of data especially complex. This research will tackle the complexity issue and provide a more complete account of the value of data—especially its dependence on privacy-protection policies. By doing so, it will advance our understanding of the demand for data in the digital economy and provide insights into how data markets work and may be affected by policy interventions. This research will also shed light on the debate about how to individually compensate consumers for their data, which many scholars and policymakers believe to be an essential aspect of a functioning data market.

More specifically, this research project will study what determines the value of an individual consumer's data record for the intermediary that uses it as an input in its business. For instance, such a record can be the characteristics of a buyer that an e-commerce platform stores on its servers. When data is used by a third party (like a platform) to strategically direct interactions between multiple agents (like buyers and sellers), assessing its value is complicated and calls for a new approach. The project shows that this value is not just the payoff the intermediary derives directly from a record (like a platform's transaction fee). It involves other components, which can significantly bias our assessments if ignored. They capture externalities between the records of, say, different buyers not because of a statistical correlation, but because of how the platform partitions its knowledge of the buyers so as to direct sellers' responses (e.g., by pooling buyers into market segments). Such externalities can render the record of a low-spending buyer more valuable than that of a high-spending buyer. The first part of the project will study contexts where the intermediary already owns the data and can use it without people's consent. Its core contribution is to show how to properly assess the value of individual records and characterize all its components. The second part of the project will study how the value of data changes when each consumer can withhold their data from the platform. One key insight is that privacy rights may not only shift wealth from data-users to data-sources (i.e., from intermediaries to consumers), but also change the value of data records itself. For instance, it can increase the value of some people's records at the expense of others. Thus, privacy can have redistributive effects across data-sources, which may contribute to social inequality and should be taken into account by privacy-protection policies.

This award reflects NSF's statutory mission and has been deemed worthy of support through evaluation using the Foundation's intellectual merit and broader impacts review criteria.