We investigate the effects of price discrimination on prices, profits, and consumer surplus when (a) at least one competing firm can use consumers' private information to price discriminate yet (b) consumers can prevent such use by paying a "privacy cost." Unlike a monopolist, competing duopolists do not always benefit from a higher privacy cost because each firm's profit decreases-and consumer surplus increases-with that cost. Under such competition, the optimal strategy for an owner of consumer data that sells information in a single block is selling to only one firm, thereby maximizing the stakes for rival buyers. The resulting inefficiencies imply that policy makers should devote more attention to discouraging exclusivity deals and less to ensuring that consumers can easily protect their privacy.

Montes, R., Sand-Zantman, W., Valletti, T. (2019). The value of personal information in online markets with endogenous privacy. MANAGEMENT SCIENCE, 65(3), 1342-1362 [10.1287/mnsc.2017.2989].

The value of personal information in online markets with endogenous privacy

Valletti T.
2019-01-01

Abstract

We investigate the effects of price discrimination on prices, profits, and consumer surplus when (a) at least one competing firm can use consumers' private information to price discriminate yet (b) consumers can prevent such use by paying a "privacy cost." Unlike a monopolist, competing duopolists do not always benefit from a higher privacy cost because each firm's profit decreases-and consumer surplus increases-with that cost. Under such competition, the optimal strategy for an owner of consumer data that sells information in a single block is selling to only one firm, thereby maximizing the stakes for rival buyers. The resulting inefficiencies imply that policy makers should devote more attention to discouraging exclusivity deals and less to ensuring that consumers can easily protect their privacy.
2019
Pubblicato
Rilevanza internazionale
Articolo
Esperti anonimi
Settore SECS-P/01 - ECONOMIA POLITICA
English
price targeting; privacy; consumer data; big data; marketing
Montes, R., Sand-Zantman, W., Valletti, T. (2019). The value of personal information in online markets with endogenous privacy. MANAGEMENT SCIENCE, 65(3), 1342-1362 [10.1287/mnsc.2017.2989].
Montes, R; Sand-Zantman, W; Valletti, T
Articolo su rivista
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/2108/232248
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