Consumers' privacy choices in the era of big data

Sebastian Dengler and Jens Prüfer

Games and Economic Behavior, 2021, vol. 130, issue C, 499-520

Abstract: Recent progress in information technologies provides sellers with detailed knowledge about consumers' preferences, approaching perfect price discrimination in the limit. We construct a model where consumers with less strategic sophistication than the seller's pricing algorithm face a trade-off when buying. They choose between a direct, transaction cost-free sales channel and a privacy-protecting, but costly, anonymous channel. We show that the anonymous channel is used even in the absence of an explicit taste for privacy if consumers are not too strategically sophisticated. This provides a micro-foundation for consumers' privacy choices. Some consumers benefit but others suffer from their anonymization.

Keywords: Privacy; Big data; Perfect price discrimination; Level-k thinking (search for similar items in EconPapers)
JEL-codes: D01 D11 D83 L11 L86 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Working Paper: Consumers' Privacy Choices in the Era of Big Data (2018)
Working Paper: Consumers' Privacy Choices in the Era of Big Data (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:130:y:2021:i:c:p:499-520

DOI: 10.1016/j.geb.2021.09.007

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