Contents

INTRODUCTION...............................................................................................................2
OVERVIEW OF THE LEADING RESEARCH QUESTIONS..........................................2
BRIEF OF RESEARCH RESULTS....................................................................................2
DISCUSSION......................................................................................................................4
CONCLUSION....................................................................................................................9
REFERENCES..................................................................................................................10
 i. Introduction
The digital economy is defined mainly as an economic form based on digitalization,
using the internet as a platform and data as a resource, driven by innovation to provide
new products and services due to low transaction costs and time, and increased
competitiveness. This economy is characterized by its efficiency, convenience,
intelligence, and the shared nature of its resources, bringing significant transformation
and progress to human society. (Lazovic & Durickovic, 2014). The researcher reviewed
recent economic research that sheds light on these issues and discussed how well-
designed platform policies, competition, regulation, IP protection, and consumer privacy
can improve market performance in the digital economy (Chen, 2020).
The article I chose to study is “Improving Marketing Performance in the Digital
Economy” from China Economic Review. The article focuses on improving the digital
economic performance in several aspects of platforms’ roles as intermediaries, innovation
and intellectual property protection, and the balance between consumer data usage and
privacy protection regardless of regional and sectoral disparities. The research questions
and results will be highlighted in the following parts. The rest of the study aims to give
insight comments based on my point of view and suggestions.

ii. Overview of the leading research questions

How do platforms function as information intermediaries in the digital economy?
What is the impact of innovation and intellectual property (IP) protection in the digital
economy?
What is the trade-off between consumer data usage and privacy protection?

iii. Brief of research results

How do platforms function as information intermediaries in the digital economy?
In the digital economy, the function of digital platforms play an essential role in
facilitating transactions by reducing customer search costs. These platforms efficiently
connect buyers and sellers, speeding up transactions and expanding market access, which
benefits smaller sellers in particular (Chen, 2020). Market sizes have increased due to the
lower entrance and search costs associated with digital platforms, increasing the
platforms' effectiveness in transaction facilitation. This growth contributes significantly
to market efficiency and the commercial success of major platform companies (Chen,
2020). On the other hand, Digital platforms are crucial in organizing customer searches
and enhancing market efficiency. For instance, using auctions for advertising positions by

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platforms efficiently sorts sellers, aiding consumers in finding matches with lower
expected search costs (Chen, 2020). However, it highlights concerns about market power
and the need for regulatory measures to address issues such as biased search results,
exclusionary practices, and product bundling. These challenges underscore the
importance of antitrust actions to maintain competition, the delicate balance between the
advantages of data usage for firms, and the imperative of protecting consumer privacy
(Chen, 2020).
Furthermore, since digitalization enhances the value of innovation, innovation
emphasizes the necessity and importance of intellectual property protection, especially
for digital products with low reproduction and transportation costs. This also points out
the rising concerns about platform biases and potential abuses of market power, stressing
the need for regulatory oversight and fair competition practices (Chen, 2020).
Additionally, due to the relatively low entry cost, the average firm quality of digital
platforms is relatively low, and some regulations and policies can be implemented to
restrict the entry of firms with low product quality, so as to improve the market
performance by enhancing the product quality (Chen, 2020).
Overall, key insights into how digital platforms operate and function in the digital
economy highlight their critical role as information intermediaries in driving economic
growth and efficiency.

What is the impact of innovation and intellectual property protection in the digital
economy?
The impact of innovation and intellectual property protection in the digital economy is
multifaceted and significant. Firstly, innovation is increasingly recognized as a driving
force behind successful economic development. Intellectual property protection plays a
critical role in this context by advancing innovation capabilities and respecting property
rights. According to Chen (2020), theoretical and empirical studies suggest that optimal
intellectual property protection, while initially weaker in developing countries, should
gradually align with standards in the developed world, this is exemplified by the rapid
development of economies like China, which has increasingly emphasized innovation
and intellectual property protection. Secondly, the standard for patentability affects the
rate and direction of industry innovation. Studies have shown that the rate of innovation
varies with patentability standards in an inverted-U shape, as innovation values rise and
imitation costs fall, intellectual property protection becomes more crucial for economic
development (Chen, Pan, and Zhang, 2018). The increase in intellectual property
protection coupled with reduced search costs leads to more efficient technology markets
and a rise in external rather than internal innovation (Chen, 2020). Digital technology has
facilitated this shift by enabling businesses to effectively collect and leverage consumer
data. Lastly, digitization has increased the value of innovation, which has increased the
need for strict intellectual property protection. Many digital products are cheaper to copy

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and transport, and individual companies can efficiently serve large markets with
innovative products. This increases the value of the innovation, while strong intellectual
property rights, particularly patent protection, are needed to deter imitation and provide
incentives for innovation (Chen, 2020). The focus on sequential or cumulative innovation
has gained more attention in the economic literature, where the effects of patent policy
differ from the effects of a single innovation. This shift recognizes the complexity of
innovation in the digital age and the subtle role that intellectual property protection plays
in fostering innovation in the industry (Chen, 2020).
Innovation and intellectual property protection in the digital economy are closely linked,
and intellectual property is an essential challenge in encouraging innovation, shaping
economic development, and protecting intellectual property in the future digital economy.

What is the trade-off between consumer data usage and privacy protection?
The trade-off between consumer data usage and privacy protection in the digital economy
involves balancing the benefits of data for innovation against the risks to consumer
privacy. The ability of companies to understand consumer preferences through data
collection is critical to product innovation. However, strict privacy policies may restrict
access to certain necessary information, thereby hindering access to data information for
consumer preferences and consumer experiences. On the contrary, strict privacy policies
can foster innovation by increasing consumers' willingness to share data. This suggests a
non-monotonic relationship between privacy protection and innovation, and that
strengthening privacy protection can promote innovation rather than hinder it (Chen,
2020). On the other hand, consumer data is beneficial for companies in designing and
producing new or improved products. It helps personalize products to meet consumer
needs better or reduce consumer search costs, through recommendations or targeted
advertising. However, risks include the potential for companies to use customer purchase
history to determine price, intruding on consumers' inherent need for privacy, and the
possibility of hacking and disclosure of private information (Chen, 2020). Moreover,
Privacy preferences vary widely from country to country, making effective data
protection regulation difficult to achieve. For instance, a more significant percentage of
consumers in European nations are less willing to provide personal information than in
the United States (Chen, 2020). Consequently, uniform data protection norms across
countries can lead to over or under-protection in different locations. Additionally,
consumer data protection interacts with competition policy, influencing the competitive
dynamics in digital markets (Chen, 2020).
Weighing the benefits of consumer data to product innovation and market efficiency
against the possible harms to consumer privacy is a controversial topic. The use of
privacy data and data protection varies across regions, which causes more complex
issues.

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 iv. Discussion
I believe that the digital economy is more than just the digitization of transactions,
intellectual property and consumer privacy are also important. The digital economy has
shifted the value of products or services created and transacted in traditional ways into
the Internet world, such as Amazon, Shopify, YouTube, Zoom, Facebook, and many
more. As the development of the digital economy continues, tons of platforms that
provide services and products are emerging everywhere on the Internet. We can call a taxi
just to open the Uber platform. We can buy almost all products on Amazon or other
platforms. I believe different platforms offer different services and products, anything we
could find from platforms. The role of digital platforms is significant in our daily lives, it
is no doubt, especially during the pandemic. Platforms provide us with a convenient
lifestyle, save us time, and lower search costs. We benefit from the function of digital
platforms. However, it is also important to know the impact of intellectual properties in
the digital economy by looking at the relationship between innovation performance and
development. Lastly, data usage and privacy concerns are discussed.

The function of platforms function as information intermediaries in the digital

economy
Digital platforms share three fundamental characteristics: they are technologically
mediated, they facilitate interaction between user groups, and they allow those user
groups to perform specific activities (Cusumano et al., 2019; de Reuver et al., 2018;
Gawer, 2009). I believe one of the most important functions of platforms in Digital
platforms is enhancing transaction efficiency. It acts as a bridge between sellers and
buyers, making it easier for them to find each other. Digital platforms are the place
where a wide range of products or services are displayed through the Internet, they
reduce the time and effort required for consumers to search for what they need. This
efficiency in connecting supply with demand is a fundamental aspect of their role as
intermediaries. However, in my opinion, these platforms have significantly destroyed
traditional industry. For instance, Grab and Uber, those online car hailing services
reshaped traditional taxi transportation. Streaming and short video platforms like Netflix,
Youtube, TikTok have transformed the traditional Television industry. Second, these
platforms collect vast amounts of data on consumer preferences, purchasing behaviour,
and search patterns. I believe the firms will benefit from using those data. This is because
platforms can offer personalized recommendations to users, hence improving the
relevance and efficiency of the search process but also raising privacy concerns. I believe
the usage of consumer data will enhance user experience and provide valuable insights to
sellers about market trends and consumer preferences. Third, it seems to me that digital
platforms play a vital role in social networking and education. For example, WhatsApp,
Snapchat, Facebook, Coursera or Khan Academy. They are intermediaries in connecting
individuals and businesses and sharing knowledge. However, I think those platforms also
raise the issue of cybersecurity. For example, hacking and virus attacks. Some

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organizations steal user data and sell it to other firms to make money purpose or other
criminal purposes. New technologies also bring unknown cybersecurity risks, such as
data misuse and unauthorized access (Gupta, 2019). This should be noticed when
discussing how to improve market performance in the digital economy.
I believe the function of platforms as intermediaries in the digital economy plays
multifaceted roles that are essential in enhancing transaction efficiency, data analytics and
insights, social networking and knowledge sharing. However, those platforms can bring
negative results to individuals and traditional businesses. Hence, I believe the proper
usage of platforms and strict regulation is important in terms of transaction efficiency,
data usage and privacy security, and social impact.

The impact of innovation and intellectual property protection in the digital economy
I believe innovation and intellectual property protection in the digital economy
significantly influence technological advancement and creative output, influence
consumer experience and market competition, bring legal and ethical challenges to
society as well. According to Ayyagari et al. (2008a), if property rights are insufficient
there will be less investment and more opportunistic behaviour. In my opinion, I believe
strong intellectual property protection impacts on encouraging innovation. For example,
if I create a brand and maintain good product quality in the digital economy, the brand's
popularity and influence become higher. However, I did not register a trademark for this
brand, and someone else knew that I did not register it, so he registered it. After he
successfully registers, I can no longer use this brand, and all the influence accumulated
by my time and energy will be given away. Another example, I spent a lot of costs and
resources to develop a very advanced technology, which can bring me billions of dollars
a year. However, I have not applied for a patent. If others learn about my technology
through reverse engineering, they can use my invention. I have no patent rights and
cannot prohibit others from using it. So I share part of the annual profits of billions of
dollars with others. I think if innovation is not protected, it will dampen people's
enthusiasm for innovation and slow down social development. Therefore, I insist that
intellectual property rights protect innovation. I believe only when innovation is protected
will more people invest their costs and resources in innovation, and only in this way will
the economy progress and develop. However, I think innovation rewards are a means of
motivating policies. I suggest that local governments declare some reward policies when
innovation or new technology is created in this state. This way can promote more people
to develop and innovate new things.
On the other hand, I believe strong intellectual property protection impacts on economic
growth. An intriguing example that the very fast growth of China economy, which has put
an increasing attention on innovation in recent years, and China becoming the most
patent application worldwide (Chen, 2020). China has become the second largest
economy in the world. Therefore, the innovation performance has a positive relationship

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with economic development, which has significant impact on economic growth. Below
bubble chart that the trend line shows the expected innovation performance based on
income level, economies appearing above the trend line are doing better than below the
trend line (WIPO, 2023).
The positive relationship between innovation performance and development

The trade-off between consumer data usage and privacy protection in the digital
economy
In my point of view, the trade-off between consumer data usage and privacy protection in
the digital economy is a complex and critical issue, involving the balancing of various
interests and values. I believe the extensive use of consumer data allows companies to
innovate and personalize their services, leading to enhanced user experiences and new
product development. However, I think this comes at the cost of potentially infringing on
individual privacy. Personal data can be highly sensitive, and its misuse or unauthorized
access can lead to significant privacy invasion. I believe data usage is the double-edged
sword of technology. The advancement of technology, such as big data and artificial
intelligence, has provided us with unprecedented convenience. But at the same time, they
also make our personal information easier to collect and analyze. Our shopping habits,
travel history and even health data may be used for ad targeting, market analysis, and
even political propaganda. Hence, in my opinion, I believe that the balance between data

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usage and privacy protection is in several aspects. For example, counterterrorism,
criminal investigation, data analytics for improving products or new technology
development. I think personal privacy rights often need to be balanced with public needs
or privacy needs. This raises a controversial debate on how and how much data usage we
should apply for technology development or improving products or services compared to
protecting personal privacy. I strongly believe consumer data usage significantly
improves product quality and innovation. For example, consumer data can provide
feedback on which platforms or features are working and which are not, identify potential
issues and quickly fix them in order to improve the consumer experience and create a
seamless experience for consumers. I think the firms can analyze effective consumer
behaviour data to predict the problems encountered by consumers and draw
corresponding solutions simultaneously. I believe only using valuable consumer data can
actively provide necessary support and assistance for consumers, which can improve user
experience and promote sales, but this must be built on the consent data usage of
consumers. I believe that analyzing consumer behaviour has always been a pillar of
successful marketing, and this pillar starts with collecting data, analyzing the data, and
using them to predict and map consumer buying behaviour. Businesses are more likely to
benefit from consumer data usage. However, it poses privacy security for consumers. The
risk of consumer data disclosure is a significant threat to consumers. Therefore, I believe
strict regulation policy needs to balance data usage and privacy protection, such as by
asking consumers to consent to the use of data. Consumers need to be aware of data
misuse, and businesses must correctly use the data and so on.
In economics, I believe that there is a maximum point which is the trade-off between
consumer data usage and privacy protection. According to Abowd and Schmutte (2019)
defined the trade-off between data privacy and data quality, see figure 1. Differential
privacy can quantify the degree of data privacy protection and disclosure. Quantified data
privacy is easier to weigh against other quantifiable metrics, including data quality
quantified by accuracy. Data privacy and data quality can then be tradeoffs not only at the
individual level, but also at the societal level.

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 Figure 1

The PF line shows the production function, which tells us what feasible combinations of
privacy loss and statistical accuracy the agency can use, given its endowment of data and
known mechanisms for publishing; The line SWF is an indifference curve from the social
welfare function. It means aggregate preference for privacy loss and accuracy; The open
circle, which is the best balance of privacy loss and accuracy (Abowd & Schmutte,
2019). In short, based on differential privacy, it represents an individual's preference for
data privacy and data quality as a simple function of privacy parameter ε and accuracy
rate I, and then sums up the social preference. Then the social optimal privacy protection
can be calculated accordingly.

v. Conclusion
To conclude, I believe the digital economy will play a far more essential role in the future
economic environment. I can imagine that advanced technologies are emerging, such as
artificial intelligence which will significantly impact our life and provide more efficient
services and products as the digital economy develops. Hence, I believe the impact of
digital platforms is increasing more positively than negatively. On the other hand,
intellectual property rights should be given attention, and strict policies and rewards
should be implemented to motivate digital technology innovation based on various
situations. Lastly, as a consumer, I believe as long as the usage of privacy data never
harms consumers, it is worth allowing firms to access personal data if we are happy and
benefit from using privacy data. I believe the trade-off between data usage and privacy
protection can achieve the maximum point where both consumers and firms are satisfied
and benefit from the data.

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