The value of personal information in online markets with endogenous privacy

Rodrigo Montes, Wilfried Sand-Zantman and Tommaso Valletti

No 15-583, TSE Working Papers from Toulouse School of Economics (TSE)

Abstract: This paper investigates the effects of price discrimination on prices, profits and consumer surplus, when one or more competing firms can use consumers' private information to price discriminate and consumers can pay a privacy cost to avoid it. While a monopolist always benefits from higher privacy costs, this is not true in the competing duopoly case. In this last case, firms' individual profits are decreasing while consumer surplus is increasing in the privacy cost. Finally, under competition, we show that the optimal selling strategy for the owner of consumer data consists in dealing exclusively with one firm in order to create maximal competition between the winner and the loser of data. This brings ineficiencies, and we show that policy makers should concentrate their attention on exclusivity deals rather than making it easier for consumers to protect their privacy.

Keywords: Privacy; Information; Price Discrimination (search for similar items in EconPapers)
Date: 2015-05, Revised 2017-05
New Economics Papers: this item is included in nep-com and nep-mkt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Related works:
Journal Article: 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 (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:tse:wpaper:29367

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