Online Privacy and Information Disclosure by Consumers
AbstractI study the welfare and price implications of consumer privacy. A consumer discloses information to a multiproduct seller, which learns about his preferences, sets prices, and makes product recommendations. Although the consumer benefits from accurate recommendations, the seller may use the information to price discriminate. I show that the seller prefers to commit to not use information for pricing in order to encourage information disclosure. However, this commitment hurts the consumer, who could be better off by precommitting to withhold some information. In contrast to single-product models, total surplus may be lower if the seller can base prices on information.
CitationIchihashi, Shota. 2020. "Online Privacy and Information Disclosure by Consumers." American Economic Review, 110 (2): 569-95. DOI: 10.1257/aer.20181052
- D11 Consumer Economics: Theory
- D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
- L81 Retail and Wholesale Trade; e-Commerce
- M31 Marketing