Selling Data to Marketers

The supply and demand for data analytics is growing rapidly. Recent years have seen a surge in the availability of massive consumer data and in the emergence of data sellers (e.g., brokers and intermediaries). Unlike standard products, the value of data analytics for marketers depends on how their business decisions can be informed and improved. In this paper we investigate how a monopoly seller can offer a menu of data-based service plans to screen heterogenous marketers that can decide whether to take an action (e.g., direct selling, targeting, lending) with uncertain value and privately known cost. We characterize how, and for which marketers, the provision of information may be distorted in the optimal design. We present conditions under which optimally supplied information can be socially excessive or insufficient. It is shown that selling the data as supplemental information (data appends) may yield double reversals in the optimal service plans, in comparison to those when the data is sold as essential information (marketing lists). We articulate how these results are coherently driven by the same underlying mechanism regarding how the marginal value of information is endogenously derived from the improvement in the marketers' decision making over their default action.