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The value of personal information in online markets with endogenous privacy

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Title: The value of personal information in online markets with endogenous privacy
Authors: Montes, R
Sand-Zantman, W
Valletti, T
Item Type: Journal Article
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.
Issue Date: 15-Mar-2019
Date of Acceptance: 18-Oct-2017
URI: http://hdl.handle.net/10044/1/52028
DOI: https://doi.org/10.1287/mnsc.2017.2989
ISSN: 0025-1909
Publisher: INFORMS
Start Page: 1342
End Page: 1362
Journal / Book Title: Management Science
Volume: 65
Issue: 3
Copyright Statement: © 2018 INFORMS.
Keywords: Social Sciences
Science & Technology
Technology
Management
Operations Research & Management Science
Business & Economics
price targeting
privacy
consumer data
big data
marketing
CONSUMER PRIVACY
CUSTOMER
ECONOMICS
COMPETITION
08 Information and Computing Sciences
15 Commerce, Management, Tourism and Services
Operations Research
Publication Status: Published
Online Publication Date: 2018-05-31
Appears in Collections:Imperial College Business School