Data Trading with a Monopoly Social Network: Outcomes are Mostly Privacy Welfare Damaging

TL;DR

This paper demonstrates that in a monopoly social network, data trading often results in under-pricing and welfare loss, challenging the belief that more data always enhances market efficiency.

Contribution

It introduces a theoretical framework showing how monopoly data trading can harm welfare and under-price data, contrasting with traditional economic intuition.

Findings

Data trading under monopoly leads to privacy welfare loss.

Increased data signals do not necessarily improve market efficiency.

The theory suggests potential welfare damages in oligopoly social network markets.

Abstract

This paper argues that data of strategic individuals with heterogeneous privacy valuations in a distributed online social network (e.g., Facebook) will be under-priced, if traded in a monopoly buyer setting, and will lead to diminishing utilitarian welfare. This result, for a certain family of online community data trading problems, is in stark contrast to a popular information economics intuition that increased amounts of end-user data signals in a data market improves its efficiency. Our proposed theory paves the way for a future (counter-intuitive) analysis of data trading oligopoly markets for online social networks (OSNs).