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;
JEL codes
- D43: Oligopoly and Other Forms of Market Imperfection
- D82: Asymmetric and Private Information • Mechanism Design
- L13: Oligopoly and Other Imperfect Markets
Reference
Andrew Rhodes, and Jidong Zhou, “Personalization and Privacy Choice”, TSE Working Paper, n. 24-1525, April 2024.
See also
Published in
TSE Working Paper, n. 24-1525, April 2024