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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/29457
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| Title: | Who Benefits from Online Privacy? |
| Authors: | Taylor, Curtis R. - Duke University
Wagman, Liad - Duke University |
| Keywords: | Privacy, price discrimination, anonymity, opt out, e-commerce |
| Issue Date: | 2008 |
| Series/Report no.: | Net Institute Working Paper;08-26 |
| Abstract: | When firms can identify their past customers, they may use information
about purchase histories in order to price discriminate. We present a
model with a monopolist and a continuum of heterogeneous consumers,
where consumers can opt out from being identified, possibly at a cost.
We find that when consumers can costlessly opt out, they all
individually choose privacy, which results in the highest profit for the
monopolist. In fact, all consumers are better off when opting out is
costly. When valuations are uniformly distributed, social surplus is
non-monotonic in the cost of opting out and is highest when opting out
is prohibitively costly. We introduce the notion of a privacy gatekeeper
— a third party that is able to act as a privacy conduit and set
the cost of opting out. We prove that the privacy gatekeeper only
charges the firm in equilibrium, making privacy costless to consumers. |
| URI: | http://hdl.handle.net/2451/29457 |
| Appears in Collections: | NET Institute Working Papers Series
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