Robust Regulation of Firms' Access to Consumer Data

Abstract: In this paper I study how to regulate firms' access to consumer data when the latter is used for price discrimination and the regulator faces non-Bayesian uncertainty about the correlation structure between data and willingness to pay, and hence about the way the monopolist will use the consumers' information to segment the market. I fully characterize all policies that are worst-case optimal when the regulator maximizes consumer surplus: the regulator allows the monopolist to access data if the monopolist cannot use the database to identify a small group of consumers. Furthermore, from the set of policies that achieve the largest worst-case consumer surplus, I identify the ones that are undominated; i.e., there is no alternative policy that never yields lower consumer surplus, and sometimes strictly higher consumer surplus.