Regulating the Collection of Data as A Factor of Production: An Economic Analysis

The widespread use of digital devices has enabled firms to collect and accumulate massive data that can be used to improve product quality. In this way, data has become one of the essential driving forces for value production and serve as a new factor of production. This paper employs a game-theoretical approach to whether and when it is necessary to regulate a monopolistic firm’s data collection. We find that the het- erogeneity of consumer privacy concerns affects the effectiveness of the social planner’s data regulation policy. In addition, when the firm is stronger with data analytics, over-collection of data is less likely, which implies that strict data collection regulation is no longer necessary.