Seminar – GDPR and the lost generation of innovative apps

Michael Kummer, Assistant Professor, University of East Anglia, Norwich

The General Data Protection Regulation (GDPR), enacted with the goal of protecting user privacy, imposed compliance costs on app developers and may have inhibited revenue generation. Using data on 4.1 million apps at the Google Play Store from 2016 to 2019, we document that GDPR induced the exit of about a third of available apps. Moreover, in the quarters following implementation, entry of new apps fell by over half. While the exiting apps had very little usage, the reduction in entry was more consequential for consumers. Because app success is unpredictable at launch, the missing apps would have been nearly as useful, on average, as those that still entered: Post-GDPR entry cohorts, less than half as large as their pre-GDPR counterparts, account for just over half as much usage as average pre-GDPR cohorts at the same ages. After documenting these descriptive facts, we estimate a structural model of demand and entry in the app market. Comparing equilibria with and without GDPR, we find that GDPR reduces consumer surplus by 32% and aggregate app usage by 26%. We conclude that, whatever the privacy benefits of GDPR, they come at substantial costs to consumers and producers.

Speaker bio

Michael Kummer is an Assistant Professor at University of East Anglia in Norwich, UK and an Adjunct Assistant Professor at the School of Economics of the Georgia Institute of Technology in Atlanta, GA. He obtained his PhD in 2014 from University Mannheim, and he is a Research Associate at the Centre for European Economic Research (ZEW) in Mannheim, Germany. Michael’s research focuses on the Economics of Digitisation. He is specifically interested in Information Technologies, Privacy, Networks and in Competition in Online Markets. He primarily uses methods from Empirical Industrial Organisation and Applied Econometrics.

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Meeting ID: 880 9681 5173
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