The Economics of Privacy
Journal of Economic Literature
vol. 54,
no. 2, June 2016
(pp. 442-92)
(Complimentary)
Abstract
This article summarizes and draws connections among diverse streams of theoretical and empirical research on the economics of privacy. We focus on the economic value and consequences of protecting and disclosing personal information, and on consumers' understanding and decisions regarding the trade-offs associated with the privacy and the sharing of personal data. We highlight how the economic analysis of privacy evolved over time, as advancements in information technology raised increasingly nuanced and complex issues. We find and highlight three themes that connect diverse insights from the literature. First, characterizing a single unifying economic theory of privacy is hard, because privacy issues of economic relevance arise in widely diverse contexts. Second, there are theoretical and empirical situations where the protection of privacy can both enhance and detract from individual and societal welfare. Third, in digital economies, consumers' ability to make informed decisions about their privacy is severely hindered because consumers are often in a position of imperfect or asymmetric information regarding when their data is collected, for what purposes, and with what consequences. We conclude the article by highlighting some of the ongoing issues in the privacy debate of interest to economists.Citation
Acquisti, Alessandro, Curtis Taylor, and Liad Wagman. 2016. "The Economics of Privacy." Journal of Economic Literature, 54 (2): 442-92. DOI: 10.1257/jel.54.2.442Additional Materials
JEL Classification
- D82 Asymmetric and Private Information; Mechanism Design
- D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
- G20 Financial Institutions and Services: General
- I10 Health: General
- L13 Oligopoly and Other Imperfect Markets
- M31 Marketing
- M37 Advertising