Selling Data to Marketers

The supply and the demand for data analytics are growing rapidly. Recent years have seen a surge in the availability of massive consumer data and in the emergence of data sellers (e.g., brokers and intermediaries). Unlike standard products, the value of data analytics for marketers depends on how their business decisions can be enabled and improved. In this paper, we investigate how a monopoly seller can offer a menu of data-based service plans to screen heterogenous marketers that can decide whether to take an action (e.g., direct selling, targeting, lending) with uncertain value and privately known cost. We characterize how, and for which marketers, the provision of information may be distorted in the optimal design. We present conditions under which optimally supplied information can be socially excessive or insufficient. It is shown that selling data appends may yield double reversals in the optimal service plans, in comparison with those when the seller’s offerings serve as marketing lists (i.e., the action is infeasible under the marketers’ outside option). We articulate how these results are coherently driven by the same underlying mechanism regarding how the marginal value of information is endogenously derived from the improvement in the marketers’ decision making over their default action. We also examine how our results can be enriched in alternative settings on the production and the costs of information. This paper was accepted by Dmitri Kuksov, marketing.