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Business & Information Systems Engineering
Published in: Business & Information Systems Engineering 5/2019

25-01-2019 | Research Paper

Data Portability on the Internet

An Economic Analysis

Author: Michael Wohlfarth

Published in: Business & Information Systems Engineering | Issue 5/2019

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Abstract

Data portability allows users to transfer data between competing online services. As data gets increasingly valuable for online services and users alike, the enforcement of data portability within the European Union by the General Data Protection Regulation will have important ramifications for the competition in online markets. Thus, this paper develops a game-theoretic model to examine firms’ strategic reaction to data portability and to identify the ensuing market outcomes. It can be shown, among others, that although data portability is designed to protect users, they may be hurt because market entrants have an incentive to increase the amount of collected data compared to a regime without data portability. However, profits for new services and total surplus increase if the costs for implementation are not too large. This likely improves innovation and service variety. Consequently, the results provide important insights and case-specific recommendations for managers and policy makers in data-driven online markets.
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Appendix
Available only for authorised users
Footnotes
1
We do not consider consumption-related benefits for users, i.e., the base utility \(v_i\) for CP i does not depend on the amount of entered data, additionally, see Sect. 6.2.
 
2
As shown in “Appendix 4”, it is irrelevant whether we assume users to be myopic or strategic.
 
3
In “Appendix 5”, we show that the entrant CP B always requires at least the amount of data CP A required in \(t=1\) if \(v_B \ge v_A\). Users then only need to reveal the net amount of required data. If \(v_B\in [{15v_A}/{16}, v_A)\), CP B sets a lower data consumption level than CP A. Then users that switch CPs derive a net benefit from a right to data portability because (1) the new service requires less data and (2) the old service has to delete already entered data due to the right to erasure which is part of the GDPR (c.f., European Commission 2016b, Article 17 and “Appendix 5”).
 
4
Formally, the derivative changes its sign in the feasible parameter range. The effect of an increasing \(\tau\) on \(\pi _A^P\) is positive if \(\tau > {\sqrt{22v_A^2-12v_A v_B+4v_B^2}}/{6}\); the effect of an increasing \(\tau\) on \(\pi _A^{NP}\) is positive if \(\tau > {\sqrt{26v_A^2-12v_A v_B+4v_B^2}}/{6}\); the effect of an increasing \(\tau\) on \(\pi _B^{NP}\) is positive if \(\tau > {(6v_B-9v_A)}/{16}\).
 
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Metadata
Title
Data Portability on the Internet
An Economic Analysis
Author
Michael Wohlfarth
Publication date
25-01-2019
Publisher
Springer Fachmedien Wiesbaden
Published in
Business & Information Systems Engineering / Issue 5/2019
Print ISSN: 2363-7005
Electronic ISSN: 1867-0202
DOI
https://doi.org/10.1007/s12599-019-00580-9

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