The Value of Anonymous Option

Jianpei Li and Wanzhu Zhang

MPRA Paper from University Library of Munich, Germany

Abstract: Personal data protection regulations typically require a seller to obtain consumers' explicit consent before processing their information. We model this requirement as an anonymous option, allowing consumers to maintain their anonymity when purchasing a product from a seller. We analyze a monopolist's incentive to offer such an option in a model of repeated purchases and limited commitment. Although collecting information implies full consumer surplus extraction in the second period, the seller is better off by offering the anonymous option. This is because it enables the seller to commit to a high second-period price for unrecognized consumers and prevents the consumers' strategic delay of consumption in the first period. In contrast, consumers are worse off because of increased prices and reduced demand. Consequently, privacy regulations mandating a compulsory anonymous option may actually fail to protect consumers' welfare.

Keywords: anonymous option; personalized pricing; privacy concern (search for similar items in EconPapers)
JEL-codes: D4 D8 L1 (search for similar items in EconPapers)
Date: 2024-01-31
New Economics Papers: this item is included in nep-mic and nep-reg
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