Abstract: Data has become the core element of the digital economy while opaque data policies introduced by platform raise concerns over privacy and data misuse.This kind of distrust prevents the economic value of data from being fully released since users are unwilling to share their data and platforms are abusing their power.It further hinders the high-quality development of digital economy.Moreover,data utilization by nature may induce negative social externalities,for example,resulting in social injustice by discrimination towards minority in data-intensive AIs,and data leakage can endanger national security.
To solve the aforementioned problems,this paper investigates the development of data collection and utilization in different development stages of digital economy.Following the setup in Fainmesser et al.(2022),our model includes one platform and a measure-one consumer.The information the platform collected improves the service it provides to consumers,but also incurs private privacy cost and social cost due to negative information externalities.We focus on the usage data,which produced by user activity.In Stage I,no data is collected nor utilized since lacking of technologies,as in the stage of web 1.0.In Stage II,big data can be processed and brings profit for platform,who collect data from consumers under opaque data policy,which assembles digital economy without effective supervision,like the current stage of web 2.0.In Stage III,platform’s data collection and usage are under strict supervision,thus allows transparent and credible data policy,implying that digital trust networks are built.Stage III represents well-supervised digital economy now and in the future,which becomes an important development direction of web 3.0.The main conclusions are as follows: ①The digital trust,or say,transparent and credible data policy,enhances the platform’s profitability by enabling the platform to commit to collect less proportion of user’s data,making the data collection choice for the platform flexible.This reduces the marginal privacy cost of usage for user,thus enhancing the user’s activity.Contrary to common intuition,opaque and inability to credibly commit constrain the platform’s profitability.②Even with strong supervision to ensure credible data policy,social externalities of data utilization may still undermine social welfare in stage III.The key lies in the social cost of data.Since in stage III,mature digital trust networks may increase the amount of data collected by platforms due to higher user’s activity,thus higher social cost can hurt total consumer welfare,and subsequently social welfare when the negative externalities of data are severe.This coincides with the data collection in practice.According to the World Economic Forum’s End User Perspectives on Digital Media Survey 2017,transparency in data policy is considered one of the most important ways to improve digital trust,and the lack of digital trust has caused 70% of Chinese respondents to avoid or stop using a digital service.At the same time,Accenture Consulting Company’s 2017 Global Consumer Dynamics Survey also pointed out that 62% of respondents want companies to use information more openly and transparently to win consumer trust,while imperfect personalized experiences and lack of digital trust have cost Chinese companies up to 5.3 trillion yuan in revenue over the past year.
As for policy implications,this paper argues that mature digital trust networks are essential to solve the problems arising from the intractable data collection and utilization activities of platforms.However,it cannot completely eliminate negative social externalities of data.Strict constraints on the proportion of users’ data collected are also required to improve total social welfare.This corresponds to the principle of minimal and necessity brought up by Personal Information Protection Law,which aims to set the upper bound of collection frequency,data type,data authority,the amount of collected data and etc.While our study stresses that such constraints must be applied in the digital economy with mature digital trust networks,lacking of digital trust makes these efforts in vein.Moreover,we suggest more measures to make users easier to understand and monitor the data collection and utilization behavior of the platform.For example,there can be an integrated index for users to compare the degree of data collection and utilization and related potential risk of softwares,so that users do not need to go over the lengthy and complex data policy contract.
The main innovation of this paper lies in two aspects.On the one hand,this is the first paper illustrating the digital development of platform economy with the development of web,highlighting the role of digital trust in shaping the platform’s profitability.Surprisingly,we find the transparency principle to enhance digital trust improves platform’s profitability by encouraging more user’s activity.On the other hand,we first show that the constraint on platform’s data collection behavior to boost the prosperity of digital economy can’t work without the mature digital trust networks.