Data Sharing and Revenue Distribution Rule

Author Name OGURO Kazumasa (Consulting Fellow, RIETI) / ISHIDA Ryo (Policy Research Institute Ministry of Finance Japan) / YASUOKA Masaya (Kwansei Gakuin University)
Creation Date/NO. March 2020 20-E-015
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The main purpose of this paper is to set a model in which there exist multiple firms producing data in a situation where each firm produces data and shares it voluntarily for new additional revenue. The model is used for theoretical examination of the revenue distribution rule and behaviors to maximize the social welfare. Consequently, the following three main results can be obtained. First, if the number of firms is sufficiently large and some conditions are assumed, the revenue distribution rule to maximize social welfare in a decentralized economy coincides with the elasticity of additional revenue with respect to the provided data. Second, if each firm maximizes profit in the decentralized economy, the firm can achieve allocations to maximize social welfare in a command optimum for any revenue distribution rule as long as the government provides the policy of lump-sum tax and subsidy appropriately. Third, if the subsidy for data sharing is financed by a flat rate tax for additional profit, each firm has an incentive to participate in the platform irrespective of the subsidy rate and revenue distribution rule.