Monetizing Privacy

26 Pages Posted: 20 May 2020 Last revised: 2 Nov 2020

See all articles by Rodney Garratt

Rodney Garratt

University of California, Santa Barbara (UCSB)

Michael Lee

Federal Reserve Banks - Federal Reserve Bank of New York

Date Written: October 20, 2020

Abstract

In a market where consumers choose between payment options, and firms compete with products and prices, we show that payment data drives the formation of a market monopoly. Active intervention can successfully restore and maintain a competitive market, but often at the expense of both efficiency and consumer welfare. The introduction of a low-cost anonymous means of electronic payment, or digital cash, preserves the market structure and improves consumers' welfare by enabling them to monetize their private information. There are, however, challenges to the private provision of digital cash. We discuss the potential role of central banks in providing digital cash.

Keywords: Customer data, privacy, market structure, digital cash, payments

JEL Classification: E42, L11, L15

Suggested Citation

Garratt, Rodney and Lee, Michael, Monetizing Privacy (October 20, 2020). Available at SSRN: https://ssrn.com/abstract=3583949 or http://dx.doi.org/10.2139/ssrn.3583949

Rodney Garratt

University of California, Santa Barbara (UCSB) ( email )

Michael Lee (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

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