User Privacy on the Digital Markets

Introduction

Microeconomics is a vital concept when organizations and individuals decide on allocating resources at a smaller scale. It focuses on smaller units of the economy, such as a firm, an individual, an industry, or a family. Microeconomics is a branch of economics that deals with people’s interaction with the market, how they make decisions, different market structure, and their impacts on production, price, and consumption (Besanko & Braeutigam, 2020). These decisions and interactions have an implication for economic outcomes. In addition, after analysis, microeconomics establishes the pricing for commodities and services that most efficiently use the available resources. The paper examines user privacy in the digital market as a recent microeconomics issue that is up for debate. It summarizes the journal, uses microeconomics theories, and provides recommendations on addressing user privacy in digital markets.

https://doi.org/10.1016/j.ijinfomgt.2021.102331

Summary and critique

Today, there has been a rise in attention to user privacy in the digital markets. Companies have digital spaces where users can leave feedback and raise their issues about the particular company’s service or product. The article analyzes how innovative data-based tactics can compromise user privacy (Saura et al., 2021). Innovative goods and company structures have emerged in the digital market over the past few decades due to data-driven innovation tactics. This information then results in user-generated data. These innovations have, however, led to the creation of complex tactics and data breaches involving user information. In addition, this has led to concerns about how firms control and manage their clients’ data.

Impacts of user privacy on the digital market industry

User privacy has an impact on demand and customer preferences. Customers are becoming more mindful when dealing with goods and services in the digital industry. They prefer to deal with those whose privacy is assured. This issue has led to an increased demand for implementing strategies that enhances privacy in the digital market. In addition, user privacy has led to regulatory compliance. For the digital market to work efficiently, there have to be laws and regulations to be followed by both companies and consumers. Failure to comply can lead to penalties and reputational damages.

User privacy has led to the Innovation and development of new products in the digital market. Companies are working towards inventing and developing devices and technologies that enhance user privacy, such as encryption (Bleier et al., 2020). In return, it leads to differentiation in the market competition. In addition, User privacy has led to market competition. Those firms in the digital market that are privacy-focused have a high potential of increasing customers.

How they relate to microeconomics theories/concepts

• Supply and demand

User privacy concerns in the digital market influence the supply and demand for privacy-enhanced goods and services. There has been a rising issue of privacy risks among companies which have led to an increased demand from customers for companies to provide services that highlight privacy. In addition, in response to the privacy demands of users in the digital market, companies increase their supply of products and services that adhere to the privacy demands. The market then maintains its competitiveness.

• Market competition

User privacy has a significant implication on market competition in the digital market. In circumstances where there is a lack of user privacy concerns, there will be an increase in market concentration. Large firms who have dominated the market can exploit their user data without their knowledge posing a possible barrier to Innovation and competition. Therefore, companies should address user privacy issues to maintain a favorable market competition landscape that enables continued Innovation and new entrants in the digital markets (Johnson et al., 2023).

• Government Policies and Elasticity

In the digital market, government policies have an influence on user privacy outcomes through law enforcement, incentives, and processes. How the government reacts to user privacy that has been breached impacts the behavior of the digital market dynamics. The intensity of this law enforcement affects the supply and demand for enhancing user privacy. When the elasticity of demand is high, the users’ priority is to enhance their privacy. However, when the elasticity of demand is low, it implies that users do not care much about their privacy being enhanced.

• Social Welfare and Externalities

User privacy can positively or negatively affect social welfare. When users in the digital market are ensured that their privacy is protected, they are anticipated to purchase online and share their feedback. As a result, positive externalities are created that benefit the overall market. In addition, privacy externalities are identified when a client’s data is gathered and used by firms without the client’s knowledge or consent. These acts can lead to undesirable externalities such as identity theft which leads to inefficiencies that demonstrate the necessity for privacy laws to safeguard people’s right to privacy.

Recommendation on how to address user privacy in digital markets

• Creating awareness of privacy in the market: The government can educate people on the importance of user privacy and make them understand their rights and ways of protecting costumer’s privacy (Bandara et al., 2021). This can be done through public campaigns.
• Encouraging transparent data practices: This can be done by encouraging firms to be clear and transparent bout their data practices to their consumers. This includes how they store their consumer’s information and how it is used.
• Employ vigorous law enforcement and accountability: There should be laws to ensure that businesses and companies protect user data. This can include putting fines when they break the law.
• Implement data protection regulations: Implement robust data protection laws that set down precise guidelines for the collection, storage, processing, and sharing of personal data.

 Conclusion

User privacy and digital markets are rising microeconomics issues in the business sector. Having the knowledge of the connection between user privacy and microeconomics is an essential aspect of the digital space. It fosters a positive competitive market space, practical Innovation, and new entrance into the market. To create rules and regulations and identify solutions that safeguard people’s privacy while enabling the advantages of the digital economy, policymakers, industry players, privacy activists, and academics participate in continuing debates and deliberations. They implement laws and regulations to protect user data in the digital market and to allow us to more secure business digital space.

References

Bandara, R., Fernando, M., & Akter, S. (2021). Managing consumer privacy concerns and defensive behaviors in the digital marketplace. European Journal of Marketing, 55(1), 219-246.

Besanko, D., & Braeutigam, R. (2020). Microeconomics. John Wiley & Sons.

Bleier, A., Goldfarb, A., & Tucker, C. (2020). Consumer privacy and the future of data-based Innovation and marketing. International Journal of Research in Marketing, 37(3), 466-480. https://doi.org/10.1016/j.ijresmar.2020.03.006

Johnson, G. A., Shriver, S. K., & Goldberg, S. G. (2023). Privacy and market concentration: intended and unintended consequences of the GDPR. Management Science.

Saura, J. R., Ribeiro-Soriano, D., & Palacios-Marqués, D. (2021). From user-generated data to data-driven Innovation: A research agenda to understand user privacy in digital markets. International Journal of Information Management, 60, 102331. https://doi.org/10.1016/j.ijinfomgt.2021.102331