Mobility with Private Information and Privacy Suppression

97 Pages Posted: 16 Apr 2018

See all articles by Saara Hamalainen

Saara Hamalainen

Helsinki Center of Economic Research (HECER)

Vaiva Petrikaite

University of Groningen

Date Written: April 2018

Abstract

We consider a problem of matching guests with suitable hosts in a dynamic, directed search market in which a visitor's private taste and plans are subject to change. Guests learn about hosts by visiting them personally, which reveals whether the destination merits a repeat visit. Hosts prefer to target guests with high willingness to pay but, assuming full privacy, cannot tell whether they should rely on previous visitors or hold a sale to attract new visitors.

We find that guests' private learning reduces matching frictions by sustaining longer visits to particularly fitting destinations. The strength of this effect depends on competition intensity. We also discover that a ban of tracking and targeting technologies may reduce consumer surplus. Specifically, access to visitor data enables their earlier hosts to respond more rapidly to demand changes, which can intensify competition and put downward pressure on prices.

Keywords: Changing tastes, directed search, Experience Goods, mobility, Privacy suppression, private information

JEL Classification: D82, D83, L11

Suggested Citation

Hamalainen, Saara and Petrikaite, Vaiva, Mobility with Private Information and Privacy Suppression (April 2018). Available at SSRN: https://ssrn.com/abstract=3163493

Saara Hamalainen (Contact Author)

Helsinki Center of Economic Research (HECER) ( email )

FI-00014 Helsinki
Finland

Vaiva Petrikaite

University of Groningen ( email )

P.O. Box 800
9700 AH Groningen, Groningen 9700 AV
Netherlands

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