Big Data for Society
Contents
BIG DATA FOR SOCIETY...................................................................................1
LECTURE 1......................................................................................................................... 2
Producer Theory.......................................................................................................... 2
Welfare Analysis.......................................................................................................... 3
Game Theory.............................................................................................................. 3
Bayesian games.......................................................................................................... 4
Behavioral economics................................................................................................. 4
LECTURE 2......................................................................................................................... 5
Principles.................................................................................................................... 5
GDPR........................................................................................................................... 5
EU Data Strategy........................................................................................................ 6
Outside of Europe....................................................................................................... 7
LECTURE 3......................................................................................................................... 8
The cost of withdrawing information...........................................................................8
The value of signals.................................................................................................... 8
Private vs. social value of information.........................................................................9
LECTURE 4....................................................................................................................... 10
Monopolies................................................................................................................ 10
Hiding....................................................................................................................... 10
Purchasing strategies................................................................................................ 12
LECTURE 5....................................................................................................................... 12
Personalization and price discrimination...................................................................12
Beyond price discrimination......................................................................................13
LECTURE 6....................................................................................................................... 14
Pros and cons of targeted advertisement.................................................................14
Evidence on consumers’ reactance...........................................................................15
LECTURE 7....................................................................................................................... 15
Echo chambers......................................................................................................... 15
The problem of polarization and echo chambers......................................................16
Link between polarization and social media..............................................................17
LECTURE 8....................................................................................................................... 18
Social media algorithm.............................................................................................18
Political participation................................................................................................. 18
LECTURE 9....................................................................................................................... 19
Data markets and data brokers................................................................................19
Data brokers’ incentives...........................................................................................19
Service providers’ incentives....................................................................................19
LECTURE 10..................................................................................................................... 20
Data externalities & data collection..........................................................................20
Intermediaries’ market power...................................................................................21
Competition on data market.....................................................................................22
LECTURE 11..................................................................................................................... 22
Value of privacy........................................................................................................ 22
Privacy paradox........................................................................................................ 22
Non-behavioral explanations.....................................................................................22
Page | 1
, Behvioral factors....................................................................................................... 23
LECTURE 12..................................................................................................................... 24
GDPR: theory and empirics.......................................................................................24
What regulation?....................................................................................................... 25
Lecture 1
Producer Theory
Profits π are simply revenues (p * q) – costs (C(q)).
Page | 2
, ∂ C( q)
- MC(q) – the cost of producing the qth unit – mc ( q )=
∂q
C ( q)
- AC(q) – average costs at q – ac ( q ) =
q
- C(q) = VC(q) + FC – variable costs vary with quantities, whereas fixed costs do not.
Firms go on producing as long as you make marginal profits. q* is optimal if: mr(q) = mc(q).
Perfect competition: each
producer has no effect on market
values → price is given. In the
short-run, profits might be
positive, but in the long-run
there’s always zero profit under
this assumption.
Monopoly: there is a unique
producer. The monopolist jointly
determines price and quantity on
the market (through demand). π= p ( q ) q−C ( q ) , where p ( q ) is the demand → mr ( q )=mc(q). Less
quantity, higher prices in a monopoly as opposed to a competitive market.
Welfare Analysis
A consumer willingness to pay is the maximum price at which the consumer would still buy the
product. It represents the marginal value of the product to the consumers. A consumer surplus indicates
how much the consumers benefit from the existence of the market for this product. The surplus
generated by each unit is the WTP – price paid.
The surplus is defined as the
surplus of all economic agents. The
producer surplus (PS) is simply the
profits generated by the producers.
TS = CS + PS (+ G if government
revenues exist).
Usually, we look at the total
surplus as an indicator of social
welfare. Yet the total surplus does
not say anything about distribution,
inequalities or fairness, it’s merely an indicator. An outcome is Pareto efficient if nobody can be made
better off without making another agent worse off.
Game Theory
Game Theory studies strategic interactions → What’s the best action when my payoff depends on it,
some external parameters and the action of others?
Further specification of games:
- The timing → simultaneous vs. sequential; one-shot vs. repeated.
- The information → incomplete information (Bayesian games)
In simultaneous games, players play at the same time without knowing
what the others play. For games with finite action sets we can represent
them in a matrix (table) where we usually want to find the Nash Equilibria
(NE) of the game. (E.g. prisoner’s dilemma:)
Page | 3
Contents
BIG DATA FOR SOCIETY...................................................................................1
LECTURE 1......................................................................................................................... 2
Producer Theory.......................................................................................................... 2
Welfare Analysis.......................................................................................................... 3
Game Theory.............................................................................................................. 3
Bayesian games.......................................................................................................... 4
Behavioral economics................................................................................................. 4
LECTURE 2......................................................................................................................... 5
Principles.................................................................................................................... 5
GDPR........................................................................................................................... 5
EU Data Strategy........................................................................................................ 6
Outside of Europe....................................................................................................... 7
LECTURE 3......................................................................................................................... 8
The cost of withdrawing information...........................................................................8
The value of signals.................................................................................................... 8
Private vs. social value of information.........................................................................9
LECTURE 4....................................................................................................................... 10
Monopolies................................................................................................................ 10
Hiding....................................................................................................................... 10
Purchasing strategies................................................................................................ 12
LECTURE 5....................................................................................................................... 12
Personalization and price discrimination...................................................................12
Beyond price discrimination......................................................................................13
LECTURE 6....................................................................................................................... 14
Pros and cons of targeted advertisement.................................................................14
Evidence on consumers’ reactance...........................................................................15
LECTURE 7....................................................................................................................... 15
Echo chambers......................................................................................................... 15
The problem of polarization and echo chambers......................................................16
Link between polarization and social media..............................................................17
LECTURE 8....................................................................................................................... 18
Social media algorithm.............................................................................................18
Political participation................................................................................................. 18
LECTURE 9....................................................................................................................... 19
Data markets and data brokers................................................................................19
Data brokers’ incentives...........................................................................................19
Service providers’ incentives....................................................................................19
LECTURE 10..................................................................................................................... 20
Data externalities & data collection..........................................................................20
Intermediaries’ market power...................................................................................21
Competition on data market.....................................................................................22
LECTURE 11..................................................................................................................... 22
Value of privacy........................................................................................................ 22
Privacy paradox........................................................................................................ 22
Non-behavioral explanations.....................................................................................22
Page | 1
, Behvioral factors....................................................................................................... 23
LECTURE 12..................................................................................................................... 24
GDPR: theory and empirics.......................................................................................24
What regulation?....................................................................................................... 25
Lecture 1
Producer Theory
Profits π are simply revenues (p * q) – costs (C(q)).
Page | 2
, ∂ C( q)
- MC(q) – the cost of producing the qth unit – mc ( q )=
∂q
C ( q)
- AC(q) – average costs at q – ac ( q ) =
q
- C(q) = VC(q) + FC – variable costs vary with quantities, whereas fixed costs do not.
Firms go on producing as long as you make marginal profits. q* is optimal if: mr(q) = mc(q).
Perfect competition: each
producer has no effect on market
values → price is given. In the
short-run, profits might be
positive, but in the long-run
there’s always zero profit under
this assumption.
Monopoly: there is a unique
producer. The monopolist jointly
determines price and quantity on
the market (through demand). π= p ( q ) q−C ( q ) , where p ( q ) is the demand → mr ( q )=mc(q). Less
quantity, higher prices in a monopoly as opposed to a competitive market.
Welfare Analysis
A consumer willingness to pay is the maximum price at which the consumer would still buy the
product. It represents the marginal value of the product to the consumers. A consumer surplus indicates
how much the consumers benefit from the existence of the market for this product. The surplus
generated by each unit is the WTP – price paid.
The surplus is defined as the
surplus of all economic agents. The
producer surplus (PS) is simply the
profits generated by the producers.
TS = CS + PS (+ G if government
revenues exist).
Usually, we look at the total
surplus as an indicator of social
welfare. Yet the total surplus does
not say anything about distribution,
inequalities or fairness, it’s merely an indicator. An outcome is Pareto efficient if nobody can be made
better off without making another agent worse off.
Game Theory
Game Theory studies strategic interactions → What’s the best action when my payoff depends on it,
some external parameters and the action of others?
Further specification of games:
- The timing → simultaneous vs. sequential; one-shot vs. repeated.
- The information → incomplete information (Bayesian games)
In simultaneous games, players play at the same time without knowing
what the others play. For games with finite action sets we can represent
them in a matrix (table) where we usually want to find the Nash Equilibria
(NE) of the game. (E.g. prisoner’s dilemma:)
Page | 3
