Markets for Leaked Information

38 Pages Posted: 3 Nov 2015 Last revised: 22 Feb 2016

See all articles by Steffen Huck

Steffen Huck

Wissenschaftszentrum Berlin für Sozialforschung (WZB)

Georg Weizsacker

Humboldt University Berlin; DIW Berlin

Date Written: January 8, 2016

Abstract

We study markets for sensitive personal information. An agent wants to communicate with another party but any revealed information can be intercepted and sold to a third party whose reaction harms the agent. The market for information induces an adverse sorting effect, allocating the information to those types of third parties who harm the agent most. In equilibrium, this limits information transmission by the agent, but never fully deters it. We also consider agents who naively provide information to the market. Their presence renders traded information more valuable and, thus, harms sophisticated agents by increasing the third party's demand for information. Half-baked regulatory interventions may hurt naive agents without helping sophisticated agents. Comparing monopoly and oligopoly markets, we find that oligopoly is often better for the agent: it requires a higher value of traded information and therefore has to grant the agent more privacy.

Keywords: privacy, markets for information, naivete

JEL Classification: C72, D11, D18, D43

Suggested Citation

Huck, Steffen and Weizsacker, Georg, Markets for Leaked Information (January 8, 2016). Available at SSRN: https://ssrn.com/abstract=2684769 or http://dx.doi.org/10.2139/ssrn.2684769

Steffen Huck

Wissenschaftszentrum Berlin für Sozialforschung (WZB) ( email )

Reichpietschufer 50
D-10785 Berlin, 10785
Germany

Georg Weizsacker (Contact Author)

Humboldt University Berlin ( email )

Spandauer Str. 1
Berlin, D-10099
Germany

DIW Berlin

Mohrenstr. 58
Berlin
Germany

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