Online Advertising and Privacy

Abstract

An online platform auctions an advertising slot. Several advertisers compete in the auction, and consumers differ in their preferences. Prior to the auction, the platform decides whether to allow advertisers to access information about consumers (disclosure) or not (privacy). Disclosure improves the match between advertisers and consumers but increases product prices, even without price-discrimination. We provide conditions under which disclosure or privacy is privately and/or socially optimal. When advertisers compete on the downstream market, disclosure can lead to an increase or a decrease in product prices depending on the nature of the information.

Keywords: online advertising, privacy, information disclosure, auctions

JEL Classification: D4