Data sharing between platform and seller: An analysis of contracts, privacy, and regulation

Abstract

Online platforms share their customers’ data with their upstream sellers, which is utilized by the sellers to gain better insights about the customers. This may help sellers to develop a product that would provide higher value to the customers. However, such data sharing among the firms causes privacy concerns among customers. In this paper, we study a game-theoretic model with an online platform (or buyer), seller, and customers facing privacy concerns. We study scenarios where the platform, the seller, and the customers may decide the extent of data to be shared by the platform with the seller under different models, such as marketplace and reselling models. Later, we also analyze the regulation of data sharing by the social planner. Our analysis characterizes the equilibrium data sharing and quality decisions, leading to intriguing findings. Specifically, under the marketplace model, the regulation of data sharing can result in either an increase or a decrease in the extent of data shared by the platform. Furthermore, compared to the scenario where a platform decides the extent of data sharing, the regulation of data sharing proves advantageous for seller and customers while being less beneficial for the platform itself. Interestingly, in the context of reselling model, we find that the regulation of data sharing does not influence the extent of data shared or the players’ payoffs compared to unregulated scenarios.