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European Journal of Law and Economics

, Volume 45, Issue 2, pp 225–250 | Cite as

Privacy law as price control

  • Caleb S. Fuller
Article
  • 451 Downloads

Abstract

The median Internet user is concerned about digital advertisers collecting personal information. To address these fears, the European Union passed the Privacy Directive to regulate the common business practice of information collection. This paper investigates the potential effects of this regulation, finding that the law is likely to generate several unintended consequences. Economists and legal scholars acknowledge that personal data serves as the “price” for accessing many digital platforms. I extend this logic to argue that if a regulation enables consumers to stop supplying this information, while continuing to consume the site’s content, it is equivalent to a price control. Next, I discuss unintended consequences that this price control may generate: tie-in sales, investment flight, and altered exchange characteristics. Lastly, I conclude that, just as with traditional price controls, the privacy price control may be a way for government officials to enhance their popularity with the citizenry. In short, my analysis suggests that one of the most well-researched policy interests of economics—the theory of price controls—can shed light on one of economists’ newest interests: digital privacy.

Keywords

Digital privacy Price control Regulation EU privacy directive 

JEL classification

K39 L51 D04 

Notes

Acknowledgements

I wish to thank Chris Coyne, Peter Leeson, Paola Suarez, David Lucas, Nicholas Pusateri, and two anonymous referees for their helpful comments on this paper. Any remaining errors are my own.

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Copyright information

© Springer Science+Business Media, LLC 2017

Authors and Affiliations

  1. 1.Economics DepartmentGeorge Mason UniversityFairfaxUSA

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