Inflation Expectations of Decision Makers and their Management

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This research will investigate the value that the data of a consumer has for the firmthat uses it. In many digital platforms, consumer data is often used to intermediate theneeds of various agents with conflicting interests—such as buyers and sellers, drivers andriders, or social-media users and advertisers. This makes determining the value of dataespecially complex. This research will tackle such complexity to provide a more completeaccount 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 digitaleconomy and provide insights into how data markets work and may be affected by policyinterventions. This research will also shed light on the debate about how to individuallycompensate consumers for their data, which many scholars and policymakers believe tobe an essential aspect of a functioning data market.More specifically, this research project will study what determines the value of a singledata 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 storeson its servers. When data is used by a third party (like a platform) to strategicallydirect interactions between multiple agents (like buyers and sellers), assessing its value iscomplicated and calls for a new approach. The project shows that this value is not just thepayoff the intermediary derives directly from a record (like a platform’s transaction fees).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 astatistical correlation, but because of how the platform partitions its knowledge of thebuyers 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 thanthat of a high-spending buyer. The first part of the project will study contexts wherethe intermediary already owns the data and can use it without people’s consent. Itscore contribution is to show how to properly assess the value of individual records andcharacterize all its components. The second part of the project will study how the valueof data changes when each consumer can withhold their data from the platform. One keyinsight 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 contributeto social inequality and should be taken into account by privacy-protection policies.1This 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.