The Value of Personal Information in Online Markets with Endogenous Privacy

Rodrigo Montes (), Wilfried Sand-Zantman and Tommaso Valletti
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Rodrigo Montes: Compass Lexecon, Washington, DC 20004

Management Science, 2019, vol. 65, issue 3, 1342-1362

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.

Keywords: price targeting; privacy; consumer data; big data; marketing (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (100)

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https://doi.org/10.1287/mnsc.2017.2989 (application/pdf)

Related works:
Working Paper: The value of personal information in online markets with endogenous privacy (2019)
Working Paper: The value of personal information in online markets with endogenous privacy (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:65:y:2019:i:3:p:1342-1362

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