Regulation and the Marketplace

Abstract

Under what conditions is government regulation better at protecting market participants than private, evolving, market-driven protections? An intriguing answer to that question emerges if we examine a relatively unregulated area of market participant protection: e-commerce privacy. In the United States, the privacy of participants engaged in e-commerce is largely unregulated by government; instead, many commercial websites contract with third parties to establish privacy protection codes and certify to Web surfers that the Web sites adhere to those codes. In the United Kingdom, on the other hand, e-commerce privacy is a matter of government regulation and enforcement by an agency created for that purpose. An analysis of these two very different approaches to online privacy suggests that private protections perform as well as - and perhaps even better than - government-regulation.

Keywords: Regulation, privacy, privacy protection, internet, internet privacy, internet regulation, government regulation, regulation by markets

JEL Classification: L86, L59, L5, O34, O38