1. Consumers’ privacy choices in the era of big data
- Author
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Jens Prüfer, Sebastian Dengler, Tilburg Law and Economic Center (TILEC), Department of Economics, and Research Group: Economics
- Subjects
Economics and Econometrics ,business.industry ,media_common.quotation_subject ,Taste (sociology) ,Internet privacy ,Big data ,Information technology ,Price discrimination ,perfect price discrimination ,privacy ,big data ,level-k thinking ,ComputingMilieux_COMPUTERSANDSOCIETY ,business ,Construct (philosophy) ,Sophistication ,Database transaction ,Finance ,media_common ,Communication channel - Abstract
Recent progress in information technologies provides sellers with detailed knowledge about consumers' preferences, approaching perfect price discrimination in the limit. We construct a model where consumers with less strategic sophistication than the seller's pricing algorithm face a trade-off when buying. They choose between a direct, transaction cost-free sales channel and a privacy-protecting, but costly, anonymous channel. We show that the anonymous channel is used even in the absence of an explicit taste for privacy if consumers are not too strategically sophisticated. This provides a micro-foundation for consumers' privacy choices. Some consumers benefit but others suffer from their anonymization.
- Published
- 2021
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