Personalization and privacy choice

Andrew Rhodes () and Jidong Zhou ()
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Andrew Rhodes: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement
Jidong Zhou: Yale School of Management - Yale University [New Haven]

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Abstract: This paper studies consumers' privacy choices when firms can use their data to make personalized offers. We first introduce a general framework of personalization and privacy choice, and then apply it to personalized recommendations, personalized prices, and personalized product design. We argue that due to firms' reaction in the product market, consumers who share their data often impose a negative externality on other consumers. Due to this privacy-choice externality, too many consumers share their data relative to the consumer optimum; moreover, more competition, or improvements in data security, can lower consumer surplus by encouraging more data sharing.

Keywords: Personalization; Consumer data; Privacy; Personalized pricing; Personalized recommendations; Personalized product design (search for similar items in EconPapers)
Date: 2024-04
Note: View the original document on HAL open archive server: https://hal.science/hal-04958392v1
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