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Nonrivalry and the Economics of Data

Sep 2019
By  Christopher Tonetti, Charles I. Jones
Data is nonrival: a person's location history, medical records, and driving data can be used by any
number of firms simultaneously. Nonrivalry leads to increasing returns and implies an important
role for market structure and property rights. Who should own data? What restrictions should
apply to the use of data? We show that in equilibrium, firms may not adequately respect the
privacy of consumers. But nonrivalry leads to other consequences that are less obvious. Because
of nonrivalry, there may be large social gains to data being used broadly across firms, even in the
presence of privacy considerations. Fearing creative destruction, firms may choose to hoard data
they own, leading to the inefficient use of nonrival data. Instead, giving the data property rights to
consumers can generate allocations that are close to optimal. Consumers balance their concerns
for privacy against the economic gains that come from selling data to all interested parties.