The Economics of Privacy
AbstractIn this chapter, we review economic analyses of privacy. We begin by scrutinizing the "free market" argument against privacy regulation, and highlight why it may not work well for personal information because welfare may be non-monotone in the quantity of information, there may be excessive incentives to collect information that has no social value, and cross-market externalities may arise from the exploitation of information. We then discuss research on property rights and suggest some challenges in determining their optimal allocation. We conclude by summarizing the insights provided by recent empirical research and highlighting directions for future research in the economics of privacy.
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