Summary

Data protection legislation and investment incentives when consumers are loss averse was a working paper by Wing Man Wynne Lam and Bruce Lyons, published online.  It is now published in Economic Letters, Vol 195, October 2020 under the title Does data protection legislation increase the quality of internet services?

Highlights of the paper

• Opt-in regulation (e.g. GDPR) changes the behaviour of loss averse consumers.
• This changes investment incentives for firms.
• Investment in data security increases under opt-in regulation.
• The condition for investment in service quality also to increase is identified.
• Most consumer types gain, even when service quality falls.