Solving the Social Dilemma with Equilibrium Data Harvesting Strategies : A Game-Theoretic Approach

Social media platforms generate huge profits from targeted advertising by collecting massive amounts of data from their users, usually referred to as data harvesting. While leveraging users' data may initially seem beneficial for users, practitioners have suggested that data harvesting causes more harm than good to users by promoting social media addiction and the spread of misinformation. Therefore, policymakers have recently considered imposing regulation on social media platforms in an attempt to lessen negative consequences. While imposing regulation is an important issue for social media platforms, users, and policymakers, it has not been rigorously analyzed. This paper attempts to fill this critical gap by developing a game-theoretic model to analyze how imposing regulations on data harvesting impacts social media platforms and users. Our results show that although such a regulation improves consumer welfare, it may sometimes increase the per-user data harvesting levels and profits of social media platforms even though their demand may decrease. Further, in the with regulation scenario, when users become more concerned about data harvesting, one of the platforms may actually set a higher per-user data harvesting level and generate a greater profit. Moreover, within the same scenario, an increase in market size or an improvement in network effects may, interestingly, sometimes reduce platforms' profits. These results and insights, along with others presented in the paper, would help both policymakers (in imposing regulations on data harvesting) and platforms (in navigating through those regulations), especially with increasing users' concerns regarding data collection