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We assess the efficacy of privacy regulation when consumers are privacy conscious.
We develop a model of data linkages where a consumer interacts sequentially with
two firms: one firm collects data on consumer behavior, and the other firm leverages
the data to set a quality level and a price. A data linkage benefits the consumer in
equilibrium when the recipient firm is sufficiently similar to the collecting firm. We
endogenize linkage formation under several existing privacy regulations. Voluntary consent
requirements benefit consumers in equilibrium but blanket bans on discriminatory
price and quality offers harm them.
