Selling Consumer Data under Limited Commitment

Abstract

A data broker repeatedly negotiates with a producer who has privately known production costs and values consumer data for price discrimination. The broker cannot commit to future offers. When he can offer rich menus of dataset--price pairs, the unique equilibrium outcome immediately implements the commitment-optimal mechanism, so limited commitment is irrelevant. When he can offer only a single dataset--price pair at a time, by contrast, we obtain a folk theorem. There is always an equilibrium in which the market clears immediately at a low price, while, when the parties are sufficiently patient, any payoff between this benchmark and the commitment payoff can be sustained. This multiplicity rests on a property specific to data: free disposal by the producer and zero marginal cost of provision make the efficient dataset for a given type nonunique, leaving the broker credible flexibility over future offers. Equilibrium multiplicity is therefore an economic prediction of the model, with identical fundamentals supporting persistently different negotiated outcomes.