Data Collection Terms, Personal Information Protection, and Consumer Welfare

How to reconcile data collection with personal information protection has become a major issue in the digital economy era. From the perspective of consumer welfare, this paper discusses whether firms should be restricted from mandating the collection of consumer data. By modeling the benefits and costs to firms and consumers under different types of data collection terms, the paper finds that, in the absence of regulation under personal information protection laws, firms choose data collection terms based on the marginal private and marginal public benefits of data. Welfare analysis shows that, compared with voluntary collection terms, mandatory collection terms may increase consumer welfare by enhancing the public benefits of data, even though they entail restrictions on consumers' individual rights. The paper then examines how the regulation of mandatory collection terms under personal information protection laws affects consumer welfare. It finds that less stringent enforcement can achieve Pareto improvements in consumer welfare in certain data collection scenarios, whereas excessively stringent enforcement does not help achieve such improvements. The policy implication is that the market-oriented reform of data as a factor of production should continue, and restrictions on data collection terms should be appropriately relaxed.