We hope this paper offers policymakers important guidance about the winners and losers from privacy regulation and how it interacts w/ multiproduct monopoly.
Big lesson: focus on ways to protect poorer consumers' privacy specifically!
Last: what if consumers don't like their data being *used* for ads? We show that this can lead to the poorest & wealthiest consumers being made better off, but the lower-middle class is harmed.
Second: what if consumers intrinsically value privacy? Doesn't change their choices, but privacy regulation shifts everybody's preferences upward. If the wealthy value their privacy more than the poor, then privacy policy becomes even more regressive (but obviously good for CS)
We explore 3 extensions. First: what if wealthy eyeballs are more valuable than poor ones to advertisers? Turns out everything goes through *if* wealthy eyeball profitability is most impacted by privacy regulation.
Who gains? Inframarginal premium consumers (wealthy) who pay lower p. Who loses? Inframarginal free consumers (poor) who face higher a. Distributionally bad! We show this using my (Leisten 2024) "inequality-adjusted consumer surplus"
Privacy regulation worsens targeting, lowers advertiser WTP, and induces the platform to *shift* users from ad-supported to premium by raising a & lowering p
(This is only true in a "full coverage separating equilibrium" which we define and provide conditions for in the paper)
We build a simple model:
- Poorer consumers have lower (higher) marginal aversion to ads (spending money)
- Monopoly freemium platform chooses ad load (a) and premium price (p)
- Profits are premium revenue plus ad-revenue, which is per-eyeball advertiser WTP * number of eyeballs
Freemium: a free ad-supported version and a paid ad-free version, is everywhere these days. Youtube, Spotify, Netflix, etc.
Why offer the ad-supported version? You can get price-sensitive (poorer) customers but still monetize their attention
#EconSky 🚨NEW PAPER with Ben Casner:
We present a theory of why privacy regulation can be distributionally bad when platforms offer freemium models
Never figured you to be an MMT guy but ok
CHOOSE YOUR FIGHTER
#EconSky My first publication is looking like it might be a good one!
What people think I'm doing when I say I'm "working on my egg paper" vs what I'm actually doing
"We thank the anonymous referees for their constructive feedback. In addressing their comments, we feel we have significantly improved the soup"
#EconSky Note: my online seminar on "Open(?) AI" has been **rescheduled** to Jan 27 because of the holiday. Thread describing the paper below!
bsky.app/profile/leis...
📉📈 I'm giving a (virtual) talk on "Open(?) AI" hosted by BU Questrom next month! Details/registration at the link, description of the paper below!
www.bu.edu/dbi/events/o...
bsky.app/profile/did:...
Made my schedule for #ASSA2025! Fully expecting to be able to attend all these sessions by bending time and logic to my will
#EconSky I'll be at ASSAs next week! Feel free to hit me up if you want to drink coffee and chat research, and be sure to check out this exciting, inter-field session I organized:
📉📈 I'm giving a (virtual) talk on "Open(?) AI" hosted by BU Questrom next month! Details/registration at the link, description of the paper below!
www.bu.edu/dbi/events/o...
bsky.app/profile/did:...
Weird best response function
Don't forget to register for the #ASSA2025 Annual Meeting in San Francisco! Early bird registration ends tomorrow, Dec. 3. Register now! #econsky aeaweb.org/conference/
My dad died while I was on the market (albeit during flyout season). Submit applications to anyplace that still allows submissions (even if the deadline has nominally passed). Then reach out to your advisor. Your committee may be able to make some calls to explain your circumstances. Good luck!
If we are talking about this paper, then yes omg what a tour de force
Yeah, I'm all for better frameworks! I'm also sympathetic to everyone who takes a sigh of relief when someone agrees that the market they're studying is plausibly not two-sided
I'm mostly joking, but, ya know...
Saw the paper and have to read it! The first thought that occurs to me is about distribution and not efficiency: do we accept market power as a transfer of surplus from consumers to producers of a negative externality even if it corrects a DWL?
Two sided markets are hairier. We have some lessons about them, but it has served to muck up claims of scale efficiencies, market definition (an economically problematic exercise anyway), and so on.
Possibly a bigger impact on marketing/business practices than on policy?
Auctions are a great example of where applied IO theory, and maybe some empirics, has had an immediate impact. "Economist as engineer"/Milgrom stuff.
One thing is that the New Empirical IO stuff has been great at adding rigor to non-IO fields, e.g. education, labor, urban, general market design...but it isn't all that useful in the antitrus courtroom.
Like, maybe BLP if the case is big, but usually logit + applied theory + calibration happens
