Privacy and Information Acquisition in Competitive Markets
AbstractPersonal privacy is studied in the context of a competitive product (or labor) market. Firms initially post prices (or wages) they promise to charge (or pay) individuals whose applications are ultimately approved. Contracts are incomplete because the amount of information firms acquire about applicants cannot be observed. When information acquisition corresponds to searching for bad news, firms search too hard in equilibrium. Consumers can ameliorate this by demanding inefficiently small levels of output. If economic characteristics differ across groups of applicants and price discrimination is prohibited, then members of the high-risk group are subjected to more scrutiny and suffer disproportionately high rejection rates. When information acquisition corresponds to searching for good news, firms acquire too little information about their applicants in equilibrium. Finally, if rejected applicants remain in the market and continue to apply to dfferent firms, then the resulting adverse selection may be so severe that all parties would be better off if no information was collected at all.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Berkeley Olin Program in Law & Economics in its series Berkeley Olin Program in Law & Economics, Working Paper Series with number qt5hk0k89w.
Date of creation: 19 May 2004
Date of revision:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Alessandro Acquisti & Hal R. Varian, 2005.
"Conditioning Prices on Purchase History,"
INFORMS, vol. 24(3), pages 367-381, May.
- James D. Dana, 2000.
"Competition in Price and Availability when Availability is Unobservable,"
Econometric Society World Congress 2000 Contributed Papers
1450, Econometric Society.
- Dana, James D, Jr, 2001. "Competition in Price and Availability When Availability is Unobservable," RAND Journal of Economics, The RAND Corporation, vol. 32(3), pages 497-513, Autumn.
- Fahad Khalil, 1997. "Auditing Without Commitment," RAND Journal of Economics, The RAND Corporation, vol. 28(4), pages 629-640, Winter.
- George J. Stigler, 1980. "An Introduction to Privacy in Economics and Politics," University of Chicago - George G. Stigler Center for Study of Economy and State 10, Chicago - Center for Study of Economy and State.
- Alicia H. Munnell, 1992.
"Mortgage lending in Boston: interpreting HMDA data,"
92-7, Federal Reserve Bank of Boston.
- Munnell, Alicia H. & Geoffrey M. B. Tootell & Lynn E. Browne & James McEneaney, 1996. "Mortgage Lending in Boston: Interpreting HMDA Data," American Economic Review, American Economic Association, vol. 86(1), pages 25-53, March.
- Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, January.
- Jappelli, Tullio & Pagano, Marco, 1991.
"Information Sharing in Credit Markets,"
CEPR Discussion Papers
579, C.E.P.R. Discussion Papers.
- Hirshleifer, Jack, 1971. "The Private and Social Value of Information and the Reward to Inventive Activity," American Economic Review, American Economic Association, vol. 61(4), pages 561-74, September.
- Curtis R. Taylor, 2004. "Consumer Privacy and the Market for Customer Information," RAND Journal of Economics, The RAND Corporation, vol. 35(4), pages 631-650, Winter.
- Hui, Kai-Lung & Png, Ivan P. L., 2005.
"The Economics of Privacy,"
- Heidrun Hoppe & Ulrich Lehmann-Grube, 2008.
"Price competition in markets with customer testing: the captive customer effect,"
Springer, vol. 35(3), pages 497-521, June.
- Hoppe, Heidrun C. & Lehmann-Grube, Ulrich, 2007. "Price Competition in Markets with Customer Testing: The Captive Customer Effect," CEPR Discussion Papers 6229, C.E.P.R. Discussion Papers.
- Benjamin Hermalin & Michael Katz, 2006. "Privacy, property rights and efficiency: The economics of privacy as secrecy," Quantitative Marketing and Economics, Springer, vol. 4(3), pages 209-239, September.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lisa Schiff).
If references are entirely missing, you can add them using this form.