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Privacy And Endogenous Monitoring Choice When Private Information Is A Public Good

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  • Stefan Dodds

    (Department of Economics, Queen's University)

Abstract

This paper examines why economies endow agents with a degree of personal privacy, even when (a) "no privacy" is ex-post (Pareto) efficient, and (b) a costless monitoring technology exists. A government can provide more of a public good only by identifying "valuable" agents from a population of n. All agents report their type to the government --- truthfully or not --- unsure if they, or others, are being observed. When n is small, it is shown that increasing monitoring effectiveness can actually lead to ex-post inefficiency. Political equilibria are also characterized, where agents vote to constrain the government's monitoring effectivenes but not its ability to levy penalties or rewards. When n is large, all such equilibria are efficient; however, a utilitarian government may not implement taxes to reward honest reporting, nor impose penalties to punish it, even when these options ensure full revelation. Legislating a "right to privacy", by contrast, is always inefficient.

Suggested Citation

  • Stefan Dodds, 2002. "Privacy And Endogenous Monitoring Choice When Private Information Is A Public Good," Working Paper 1010, Economics Department, Queen's University.
    • Handle: RePEc:qed:wpaper:1010
    as

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    File URL: https://www.econ.queensu.ca/sites/econ.queensu.ca/files/qed_wp_1010.pdf
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    References listed on IDEAS

    as
    1. Robin Boadway & Motohiro Sato, 2000. "The Optimality of Punishing Only the Innocent: The Case of Tax Evasion," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 7(6), pages 641-664, December.
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      • Posner, Richard A., 1980. "The Economics of Privacy," Working Papers 16, The University of Chicago Booth School of Business, George J. Stigler Center for the Study of the Economy and the State.
    4. Beck, Paul J & Davis, Jon S & Jung, Woon-Oh, 2000. "Taxpayer Disclosure and Penalty Laws," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 2(2), pages 243-272.
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    More about this item

    Keywords

    Tagging; Public Goods; Privacy;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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