Monetizing Privacy

27 Pages Posted: 20 Jan 2021

See all articles by Michael Lee

Michael Lee

Federal Reserve Banks - Federal Reserve Bank of New York

Rodney Garratt

University of California, Santa Barbara (UCSB)

Multiple version iconThere are 2 versions of this paper

Date Written: January 2021

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. A data-sharing policy 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. 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

Lee, Michael and Garratt, Rodney, Monetizing Privacy (January 2021). FRB of New York Staff Report No. 958, Available at SSRN: https://ssrn.com/abstract=3767028 or http://dx.doi.org/10.2139/ssrn.3767028

Michael Lee (Contact Author)

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

33 Liberty Street
New York, NY 10045
United States

Rodney Garratt

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

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