Strategic information and competition in digital markets.

Summary This thesis studies firms that specialize in selling personal information and how their strategies affect competition. In three chapters, we build theoretical models representing the interactions between data brokers specializing in the collection and sale of information, firms buying personal information about their customers, and consumers. We first study the strategies of data brokers in selling information for price targeting of consumers. We show that data brokers do not sell all the information they have, and that a portion of consumers remain unidentified. We then study the strategies of data brokers when they compete in price and quantity of data sold. We show that competition affects consumers in two ways. The more competition there is between brokers, the less information they collect, but the less strategic information retention they engage in. Finally, we consider the reaction of consumers when they can hide from data brokers, and show that the fact that consumers have the ability to hide will induce the broker to sell more consumer data, creating a data externality. These studies help answer important questions about regulating the collection and sale of information, while taking into account a potential active role for consumers in these practices.