Privacy and Marketing Externalities: Evidence from Do Not Call

48 Pages Posted: 12 Aug 2011 Last revised: 19 Aug 2014

See all articles by Khim Yong Goh

Khim Yong Goh

National University of Singapore (NUS)

Kai-Lung Hui

School of Business and Management, Hong Kong University of Science and Technology

Ivan P. L. Png

National University of Singapore (NUS)

Date Written: February 24, 2014

Abstract

If not well-targeted, advertising and direct marketing inflict nuisance and inconvenience on consumers. Theoretical analyses predict that consumer actions to avoid advertising impose externalities on other consumers. We investigate the extent of such externalities in the context of the U.S. Do Not Call (DNC) registry by exploiting the exogenous timing of the enforcement of the registry. Supported by multiple robustness tests, and validation and falsification exercises, we conclude that consumer DNC registrations imposed externalities on other consumers. An increase in the first wave of registrations by 1% was associated with a 3.1% increase in subsequent registrations. This effect was stronger in larger and more educationally diverse markets. The externality was possibly due to unregistered consumers being more receptive to telemarketing and telemarketers increasing calls to them. Our results suggest that managers should facilitate consumer opt-out, and especially in larger and more educationally diverse markets.

Keywords: privacy externalities, marketing do not call

JEL Classification: M37, K29

Suggested Citation

Goh, Khim Yong and Hui, Kai-Lung and Png, Ivan P. L., Privacy and Marketing Externalities: Evidence from Do Not Call (February 24, 2014). Available at SSRN: https://ssrn.com/abstract=1908495 or http://dx.doi.org/10.2139/ssrn.1908495

Khim Yong Goh

National University of Singapore (NUS) ( email )

15 Computing Drive
Singapore, 117418
Singapore
65-65162832 (Phone)
65-67791610 (Fax)

HOME PAGE: http://www.comp.nus.edu.sg/~gohky

Kai-Lung Hui

School of Business and Management, Hong Kong University of Science and Technology ( email )

Clear Water Bay
Kowloon
Hong Kong

Ivan P. L. Png (Contact Author)

National University of Singapore (NUS) ( email )

Singapore, 117543
Singapore
+65 6516-6807 (Phone)

HOME PAGE: http://sites.google.com/site/iplpng/

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