Aug 30, 2021
Data marts—especially data about identified or identifiable persons (personal data)—itsmain participants are data collectors and users.In some cases, the data generated or exchanged is about the properties or behaviors of specific objects. The subject may agree it or not, or may not actively assist it, or even be unaware of the data collection. Collectors and users sometimes interact through intermediaries. There are also some participants who assist in the processing, storage and communication of data.
One of the main attractions of the mart is that it makes mutually beneficial transactions possible. One of the necessary but insufficient conditions is that the transferee can benefit from the acquisition of relevant data, especially that it can help the transferee better decide how to act.
In order to make the data transmissionmutually beneficial, ideally, the data transmissionwill benefit both the transferor (usually consumerswho areseeking products or servicesof the company) and the transferee.The impact of the transaction on the transferor will depend on the value that the transferor obtains from the data exchange and the cost that the transferor must bear. There are at least two reasons to believe that the cost of the transferor will be very low. Firstly, in many cases, the consumption of data is non-competitive, and the transferee's use of the data will not affect the value obtained by the transferor. Secondly, the cost of implementing transmission can be extremely low, that’s because recent technological advances have greatly reduced the cost of data transmission and storage.
Nevertheless, there are still many reasons to explain why it is costly for transferors to hand over data. When the transferor is the subject of the data, he/she may worry that the data will be used to expose him/herself to: legal liability (e.g. identity theft), discrimination, unnecessary solicitation, social condemnation, or the discomfort of being monitored. When the transferor is a user, he/she may fear that disclosure will cause him to lose his/her competitive advantage.
Sometimes, a mutually beneficial data transfer is possible only when the transferee complies with certain restrictions on the use or further transfer of the data, or implements security measures that can reduce the risk of unintentional transmission.Some of these restrictions and security measures are designed to reduce the cost of data collection imposed on the transferor who is as a consumer. Other restrictions increase the transaction returns by allowing the transferor to maintain its competitiveness relative to the data mart and benefit from it. These restrictions prevent the transferee from reselling the data in competition with the transferor. In addition, the combination of use restrictions and transfer restrictions can help the transferor charge different prices to different users—that is, the so-called price discrimination. Finally, use restrictions may also help avoid expensive regulation.
The benefits and costs of data transmission don’t belong to the transferor and the transferee solely, when data transmission limits the market power of companies with data access privileges, it will also produce spillover effects. For example, large booksellers like Amazon can directly access a large amount of consumer data, and it can customize the recommendation of new products according to users' interests. If smaller booksellers cannot obtain similar data, they will be in a weak position. However, if they can trade data with other companies, by selling data collected from users and buying data from other companies, they can balance the competitive environment to a certain extent. Theoretically, users can benefit from the increasingly fierce competition.
Participants in the data market often misunderstand the nature and consequences of the transactions. There are three main reasons for this. Firstly, the collection, use and transmission of data are usually hard to observe for consumers; Secondly, Consumers may misunderstand the influence the data collected and transmitted on their welfare; Thirdly, People are likely to show “limited rationality” and psychological prejudices, making them unable to analyze the information received. More and more empirical studies support the view of the existence and causes of these misunderstandings.