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The Value of Anonymous Option

Author

Listed:
  • Li, Jianpei
  • Zhang, Wanzhu

Abstract

Personal data protection regulations typically require a seller to obtain consumers' explicit consent before processing their information. We model this requirement as an anonymous option, allowing consumers to maintain their anonymity when purchasing a product from a seller. We analyze a monopolist's incentive to offer such an option in a model of repeated purchases and limited commitment. Although collecting information implies full consumer surplus extraction in the second period, the seller is better off by offering the anonymous option. This is because it enables the seller to commit to a high second-period price for unrecognized consumers and prevents the consumers' strategic delay of consumption in the first period. In contrast, consumers are worse off because of increased prices and reduced demand. Consequently, privacy regulations mandating a compulsory anonymous option may actually fail to protect consumers' welfare.

Suggested Citation

  • Li, Jianpei & Zhang, Wanzhu, 2024. "The Value of Anonymous Option," MPRA Paper 120010, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:120010
    as

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    References listed on IDEAS

    as
    1. Chongwoo Choe & Noriaki Matsushima & Shiva Shekhar, 2023. "The Bright Side of the GDPR: Welfare-Improving Privacy Management," CESifo Working Paper Series 10617, CESifo.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    anonymous option; personalized pricing; privacy concern;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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