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Privacy Costs and Personal Data Protection: Economic and Legal Perspectives

41 Pages Posted: 13 Dec 2009 Last revised: 13 Apr 2010

Sasha Romanosky

RAND Corporation; Carnegie Mellon University - Heinz College of Information Systems and Public Policy

Alessandro Acquisti

Carnegie Mellon University - Heinz College

Date Written: December 12, 2009

Abstract

We analyze personal data protection laws in the United States through the lenses of the economic theories of ex ante safety regulation, ex post liability and information disclosure. Specifically, we consider and contrast how legal and economic theories interpret privacy costs and the remedies to those costs. First, we introduce the general economic theories of ex ante regulation, ex post liability and information disclosure. Then, we present their causal relationships and show how they attempt to reduce possible privacy harms caused by a firm’s activity. We then scrutinize their impact by contrasting legal and economic doctrines. Finally, we provide deeper economic analysis of the three legal mechanisms and highlight conditions under which they may become socially inefficient.

Keywords: information disclosure, security breach notification, data breaches, identity theft, privacy costs, ex ante safety regulation, ex post liability

JEL Classification: D18, K13, K20, L51, L86

Suggested Citation

Romanosky, Sasha and Acquisti, Alessandro, Privacy Costs and Personal Data Protection: Economic and Legal Perspectives (December 12, 2009). Berkeley Technology Law Journal, Vol. 24, No. 3, 2009. Available at SSRN: https://ssrn.com/abstract=1522605

Sasha Romanosky (Contact Author)

RAND Corporation ( email )

1776 Main Street
P.O. Box 2138
Santa Monica, CA 90407-2138
United States

Carnegie Mellon University - Heinz College of Information Systems and Public Policy ( email )

Pittsburgh, PA 15213-3890
United States

Alessandro Acquisti

Carnegie Mellon University - Heinz College ( email )

Pittsburgh, PA 15213-3890
United States
412-268-9853 (Phone)
412-268-5339 (Fax)

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