Data-trading Coordination with Government Subsidy

Data trading has become increasingly attractive and crucial in the era of the digital economy. Previous studies present insightful but only partial analysis on data-trading coordination which is of great societal value. One particular case in point is government subsidy that has been a common practice in real-life data trading markets among different countries. We propose a differential game with government subsidies that consists of three agents, a data-providing enterprise, a data trading platform, and the government. We analyze and compare the social welfares for both the centralized and decentralized systems, and present a cost-sharing contract and a revenue sharing contract to maximize the system social welfare, in which the quality and the advertising effort are important factors on data products goodwill. Our results reveal that centralization enhances the efficiency of the data trading system, and the government achieves a higher social welfare level with a lower cost subsidy coefficient. Numerical analyses are also carried to provide further managerial insights by comparative statics analysis on system parameters.