A Theory of Transactions Privacy
Charles M. Kahn
University of Illinois, Urbana-Champaign
Federal Reserve Bank of New York
Federal Reserve Bank of Atlanta
FRB Atlanta Working Paper No. 2000-22
In this paper, we consider the costs and benefits of transactions privacy. In the environment we consider, privacy is the concealment of potentially useful information, but concealment also potentially bestows benefits. In some versions of the environment, the standard Coasian logic applies: given an unambiguous initial assignment of rights and sufficient flexibility in contracting, efficiency in information revelation will result. Coasian bargaining may be impeded, however, by either an inability to make certain commitments or by the presence of significant investments that must be made before the transaction occurs. In such cases, initial assignments of rights (for example, privacy laws) can have consequences for efficiency.
Number of Pages in PDF File: 29
Keywords: Privacy, transactions, Internet, e-money
JEL Classification: D80, G28
Date posted: January 19, 2001
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