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Privacy and Marketing Externalities: Evidence from Do Not Call

Author

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  • Khim-Yong Goh

    () (NUS School of Computing, National University of Singapore, Singapore 117418, Singapore)

  • Kai-Lung Hui

    () (Department of Information Systems, Business Statistics, and Operations Management, Hong Kong University of Science and Technology, Clear Water Bay, Kowloon, Hong Kong)

  • Ivan P. L. Png

    () (NUS Business School, National University of Singapore, Singapore 119245, Singapore)

Abstract

If not well targeted, advertising and direct marketing inflict nuisance and inconvenience on consumers. Theoretical analyses predict that consumer actions to avoid advertising impose externalities on other consumers. We investigate the extent of such externalities in the context of the U.S. Do Not Call (DNC) registry by exploiting the exogenous timing of the enforcement of the registry. Supported by multiple robustness tests, and validation and falsification exercises, we conclude that consumer DNC registrations imposed externalities on other consumers. An increase in the first wave of registrations by 1% was associated with a 3.1% increase in subsequent registrations. This effect was stronger in larger and more educationally or racially heterogeneous markets. The externality was possibly due to unregistered consumers being more receptive to telemarketing and telemarketers increasing calls to them. Our results suggest that managers should facilitate consumer opt-out, especially in larger and more educationally or racially heterogeneous markets.Data, as supplemental material, are available at http://dx.doi.org/10.1287/mnsc.2014.2051 . This paper was accepted by J. Miguel Villas-Boas, marketing .

Suggested Citation

  • Khim-Yong Goh & Kai-Lung Hui & Ivan P. L. Png, 2015. "Privacy and Marketing Externalities: Evidence from Do Not Call," Management Science, INFORMS, vol. 61(12), pages 2982-3000, December.
  • Handle: RePEc:inm:ormnsc:v:61:y:2015:i:12:p:2982-3000
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    File URL: http://dx.doi.org/10.1287/mnsc.2014.2051
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    Cited by:

    1. Choi, Jay Pil & Jeon, Doh-Shin & Kim, Byung-Cheol, 2018. "Privacy and Personal Data Collection with Information Externalities," TSE Working Papers 17-887, Toulouse School of Economics (TSE).

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