Consumers' Privacy Choices in the Era of Big Data

TILEC Discussion Paper No. 2018-014

CentER Discussion Paper No. 2018-012

57 Pages Posted: 11 Apr 2018 Last revised: 1 Jun 2018

See all articles by Sebastian Dengler

Sebastian Dengler

Tilburg University, Tilburg Institute for Law, Technology, and Society (TILT); Tilburg University Department of Economics

Jens Prufer

Tilburg University - CentER; Tilburg University - Department of Economics; Tilburg University - Law and Economics Center (TILEC)

Date Written: April 9, 2018

Abstract

Recent progress in information technologies provides sellers with detailed knowledge about consumers' preferences, approaching perfect price discrimination in the limit.We construct a model where consumers with less strategic sophistication than the seller's pricing algorithm face a trade-off when buying. They choose between a direct, transaction cost-free sales channel and a privacy-protecting, but costly, anonymous channel. We show that the anonymous channel is used even in the absence of an explicit taste for privacy if consumers are not too strategically sophisticated. This provides a micro-foundation for consumers' privacy choices. Some consumers benefi t but others suffer from their anonymization.

Keywords: Privacy, Big Data, Perfect Price Discrimination, Level-k thinking

JEL Classification: L11, D11, D83, D01, L86

Suggested Citation

Dengler, Sebastian and Prufer, Jens, Consumers' Privacy Choices in the Era of Big Data (April 9, 2018). TILEC Discussion Paper No. 2018-014. Available at SSRN: https://ssrn.com/abstract=3159028 or http://dx.doi.org/10.2139/ssrn.3159028

Sebastian Dengler (Contact Author)

Tilburg University, Tilburg Institute for Law, Technology, and Society (TILT) ( email )

P.O.Box 90153
Prof. Cobbenhagenlaan 221
Tilburg, 5037
Netherlands

HOME PAGE: http://www.tilburguniversity.edu/webwijs/show/s.dengler-2/

Tilburg University Department of Economics ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Jens Prufer

Tilburg University - CentER ( email )

P.O. Box 90153
Tilburg, DC 5000 LE
Netherlands

Tilburg University - Department of Economics ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Tilburg University - Law and Economics Center (TILEC) ( email )

Warandelaan 2
Tilburg, 5000 LE
Netherlands

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