Dynamic Privacy Choices

62 Pages Posted: 29 Oct 2019 Last revised: 11 Sep 2020

Date Written: September 9, 2020

Abstract

I study a dynamic model of consumer privacy and platform data collection. In each period, consumers choose their level of platform activity. Greater activity generates more information about the consumer, thereby increasing platform profits. Although consumers value their privacy, the platform can collect information by gradually lowering the level of privacy protection. In the long run, consumers become “addicted” to the platform: They lose privacy and receive low payoffs, but choose high activity levels. If the platform cannot commit to future privacy policies, there is also an equilibrium in which the platform offers the highest privacy protection and fails to collect any information.

Keywords: platform, privacy, personal data, addiction

JEL Classification: D42, D43

Suggested Citation

Ichihashi, Shota, Dynamic Privacy Choices (September 9, 2020). Available at SSRN: https://ssrn.com/abstract=3472151 or http://dx.doi.org/10.2139/ssrn.3472151

Shota Ichihashi (Contact Author)

Bank of Canada ( email )

234 Wellington Street
Ontario, Ottawa K1A 0G9
Canada

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