International Protection of Consumer Data

We study the international protection of consumer data in a model where data from product sales generate additional revenue to firms but disutility to consumers. When data usage lacks transparency, a firm suffers a commitment problem and overuses consumer data. As transparency increases, the firm may adjust prices inefficiently across countries with different privacy preferences. Contrary to the result in the single-country case, more transparency can exacerbate data-usage and output distortions in the global economy, and unilaterally-imposed regulation on data usage may reduce global welfare. There can be substantial gains from international coordination – though not necessarily uniformity – of data regulations.