Online Privacy and Information Disclosure by Consumers

Forthcoming at American Economic Review

46 Pages Posted: 22 Feb 2018 Last revised: 4 Nov 2019

See all articles by Shota Ichihashi

Shota Ichihashi

Bank of Canada, Digital Economy and Advanced Analytics Division

Date Written: March 17, 2019

Abstract

I study the welfare and price implications of consumer privacy. A consumer discloses information to a multi-product seller, which learns about his preferences, sets prices, and makes product recommendations. Although the consumer benefits from accurate recommendations, the seller may use the information to price discriminate. I show that the seller prefers to commit to not use information for pricing in order to encourage information disclosure. However, this commitment hurts the consumer, who could be better off by precommitting to withhold some information. In contrast to single-product models, total surplus may be lower if the seller can base prices on information.

Keywords: Information disclosure, Bayesian persuasion, price discrimination, privacy

JEL Classification: D42, D43, D82, D83

Suggested Citation

Ichihashi, Shota, Online Privacy and Information Disclosure by Consumers (March 17, 2019). Forthcoming at American Economic Review. Available at SSRN: https://ssrn.com/abstract=3112905 or http://dx.doi.org/10.2139/ssrn.3112905

Shota Ichihashi (Contact Author)

Bank of Canada, Digital Economy and Advanced Analytics Division ( email )

234 Wellington Street
Ontario, Ottawa K1A 0G9
Canada

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