What are the consequences of externalities and ignorance in online platforms? An economic investigation of current practices and potential remedies.
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- Master of Science 
The pace at which online platforms have become an integral part of our everyday life is nothing short of impressive. Many of such platforms have experienced high growth in recent years which highlights the economic value of data. Using a simple economic model, we investigate the consequences of negative externalities in the market for online services and their welfare implications. We find that the consumers do not internalise the social cost of consumption, and hence the social planner suggests a lower level of consumption than in the decentralised market. Consequently, we investigate whether Pigouvian taxation can replicate the planner solution. Despite this, there seems to be a dichotomy between people’s privacy attitudes and their behaviour, which raises questions regarding the efficiency in the market for such online services. Therefore, we investigate whether ignorance among consumers’ privacy preferences can explain why they fail to adequately address their privacy concerns, leading to a higher level of consumption. Lastly, knowing the complexities of fixing this market, we investigate an alternative solution that could possibly replicate the planner solution without the need for intrusive government intervention.
Masteroppgave(MSc) in Master of Science in Business, Economics - Handelshøyskolen BI, 2021