Universität Bonn

Department of Economics

Huan Tang - LSE

“The Supply and Demand for Data Privacy: Evidence from Mobile Apps” together w/ Bo Bian and Xinchen Ma

Abstract

This paper investigates how consumers and investors react to the standardized disclosure of data privacy practices. Since December 2020, Apple has required all apps to disclose their data collection practices by filling out privacy “nutrition” labels that are standardized and easy-to-read. We web-scrape these privacy labels and first document several stylized facts regarding the supply of privacy. Second, augmenting privacy labels with weekly app downloads and revenues, we examine how this disclosure affects consumer behavior. We exploit the staggered release of privacy labels and use the non-exposed Android version of each app to construct the counterfactual. After privacy label release, an average iOS app experiences a 14% (15%) drop in weekly downloads (revenues) when compared to its Android counterpart, with an even stronger effect for more privacy-invasive and substitutable apps. Consumers in the US, UK, and France respond more negatively, suggesting that they are most averse to data collection. Moreover, we observe adverse stock market reactions, especially among firms that harvest more data, corroborating the findings on product markets. Our findings highlight data as a key asset for firms in the digital era.

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