Data brokers competition, synergic datasets, and endogenous information value

Data Brokers (DBs) aggregate vast amounts of data and sell them to downstream firms for customer profiling. Firms can decide to purchase data from multiple DBs, to leverage synergies that enhance profiling accuracy. We study how competition between DBs and the synergies between their datasets influence the price and quantity of data sold, and the effects in the downstream market in terms of prices and incentives to purchase from multiple DBs. We find that DBs can coordinate over the quantity and price of data sold to endogenously increase the value of data synergies and induce firms to purchase multiple datasets, even when synergies are relatively weak. As synergies increase, DBs reduce the quantity of data to temper downstream competition and charge higher prices for the data. If the number of firms is endogenous, higher data prices lead to reduced market entry and consumer harm.