Anonymous or personal? A simple model of repeated personalized advice

Marius Gramb and Christoph Schottmüller

No 105, Working Paper Series in Economics from University of Cologne, Department of Economics

Abstract: A consumer repeatedly asks an expert for advice. The expert's incentives are not aligned with the consumer's preferences because he can receive a bonus if the consumer takes certain actions. Over time, the expert gets to know the consumer and is therefore able to give better advice (if he wants to do so). In simple equilibria, both - consumer and expert - benefit from the expert's learning if "learning" is such that the expert's best guess about what is the best advice for the consumer becomes more precise. This provides a natural explanation for why consumers have a preference for personalized advice and also for why most internet users do not use anonymization tools. The theoretical predictions are tested in a laboratory experiment.

Date: 2022-12-09
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