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Privacy, property rights and efficiency: The economics of privacy as secrecy


  • Benjamin Hermalin


  • Michael Katz



There is a long history of governmental efforts to protect personal privacy and strong debates about the merits of such policies. A central element of privacy is the ability to control the dissemination of personally identifiable data to private parties. Posner, Stigler, and others have argued that privacy comes at the expense of allocative efficiency. Others have argued that privacy issues are readily resolved by proper allocation of property rights to control information. Our principal findings challenge both views. We find: (a) privacy can be efficient even when there is no “taste” for privacy per se, and (b) to be effective, a privacy policy may need to ban information transmission or use rather than simply assign individuals control rights to their personally identifiable data. Copyright Springer Science + Business Media, LLC 2006

Suggested Citation

  • Benjamin Hermalin & Michael Katz, 2006. "Privacy, property rights and efficiency: The economics of privacy as secrecy," Quantitative Marketing and Economics (QME), Springer, vol. 4(3), pages 209-239, September.
  • Handle: RePEc:kap:qmktec:v:4:y:2006:i:3:p:209-239 DOI: 10.1007/s11129-005-9004-7

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    References listed on IDEAS

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    10. 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 561-574, September.
    11. Varian, Hal R., 1989. "Price discrimination," Handbook of Industrial Organization,in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 10, pages 597-654 Elsevier.
    12. 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.
    13. Posner, Richard A, 1981. "The Economics of Privacy," American Economic Review, American Economic Association, vol. 71(2), pages 405-409, May.
    Full references (including those not matched with items on IDEAS)


    Blog mentions

    As found by, the blog aggregator for Economics research:
    1. Contradictions in privacy
      by Chris Sampson in Chris Sampson on 2013-10-23 10:30:22


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Luc Wathieu & Allan Friedman, 2009. "An empirical approach to understanding privacy concerns," ESMT Research Working Papers ESMT-09-001, ESMT European School of Management and Technology, revised 14 Jan 2009.
    2. Simeon Schudy & Verena Utikal, 2015. "Does imperfect data privacy stop people from collecting personal health data?," TWI Research Paper Series 98, Thurgauer Wirtschaftsinstitut, Universität Konstanz.
    3. Jentzsch, Nicola, 2008. "An economic analysis of China's credit information monopoly," China Economic Review, Elsevier, vol. 19(4), pages 537-550, December.
    4. Kai-Lung Hui & I.P.L. Png, 2005. "The Economics of Privacy," Industrial Organization 0505007, EconWPA, revised 29 Aug 2005.
    5. Miettinen, Topi & Stenbacka, Rune, 2015. "Personalized pricing versus history-based pricing: implications for privacy policy," Information Economics and Policy, Elsevier, vol. 33(C), pages 56-68.
    6. Avi Goldfarb & Catherine Tucker, 2012. "Privacy and Innovation," Innovation Policy and the Economy, University of Chicago Press, vol. 12(1), pages 65-90.
      • Avi Goldfarb & Catherine Tucker, 2012. "Privacy and Innovation," NBER Chapters,in: Innovation Policy and the Economy, Volume 12, pages 65-89 National Bureau of Economic Research, Inc.
    7. Katz, Michael L., 2013. "Provider competition and healthcare quality: More bang for the buck?," International Journal of Industrial Organization, Elsevier, vol. 31(5), pages 612-625.
    8. Jin-Hyuk Kim & Liad Wagman, 2015. "Screening incentives and privacy protection in financial markets: a theoretical and empirical analysis," RAND Journal of Economics, RAND Corporation, vol. 46(1), pages 1-22, March.
    9. Benndorf, Volker & Kübler, Dorothea & Normann, Hans-Theo, 2015. "Privacy concerns, voluntary disclosure of information, and unraveling: An experiment," European Economic Review, Elsevier, vol. 75(C), pages 43-59.
    10. Budzinski, Oliver, 2017. "Wettbewerbsregeln für das Digitale Zeitalter - Die Ökonomik personalisierter Daten, Verbraucherschutz und die 9. GWB-Novelle," Ilmenau Economics Discussion Papers 108, Ilmenau University of Technology, Institute of Economics.
    11. Beresford, Alastair R. & Kübler, Dorothea & Preibusch, Sören, 2012. "Unwillingness to pay for privacy: A field experiment," Economics Letters, Elsevier, vol. 117(1), pages 25-27.
    12. Budzinski, Oliver & Grusevaja, Marina, 2017. "Die Medienökonomik personalisierter Daten und der Facebook-Fall," Ilmenau Economics Discussion Papers 107, Ilmenau University of Technology, Institute of Economics.
    13. repec:kap:ejlwec:v:44:y:2017:i:1:d:10.1007_s10657-014-9436-1 is not listed on IDEAS
    14. Michele Braun & James J. McAndrews & William Roberds & Richard J. Sullivan, 2008. "Understanding risk management in emerging retail payments," Economic Policy Review, Federal Reserve Bank of New York, issue Sep, pages 137-159.
    15. Cecere, Grazia & Rochelandet, Fabrice, 2013. "Privacy intrusiveness and web audiences: Empirical evidence," Telecommunications Policy, Elsevier, vol. 37(10), pages 1004-1014.
    16. Fabrice Rochelandet & Silvio H. T. Tai, 2016. "Do privacy laws affect the location decisions of internet firms? Evidence for privacy havens," European Journal of Law and Economics, Springer, vol. 42(2), pages 339-368, October.
    17. Morlok, Tina & Matt, Christian & Hess, Thomas, 2017. "Privatheitsforschung in den Wirtschaftswissenschaften: Entwicklung, Stand und Perspektiven," Working Papers 1/2017, University of Munich, Munich School of Management, Institute for Information Systems and New Media.
    18. Simeon Schudy & Verena Utikal, 2012. "The Influence of (Im)perfect Data Privacy on the Acquisition of Personal Health Data," Working Paper Series of the Department of Economics, University of Konstanz 2012-12, Department of Economics, University of Konstanz.
    19. Vincent Conitzer & Curtis R. Taylor & Liad Wagman, 2012. "Hide and Seek: Costly Consumer Privacy in a Market with Repeat Purchases," Marketing Science, INFORMS, vol. 31(2), pages 277-292, March.
    20. Savage, Scott J. & Waldman, Donald M., 2015. "Privacy tradeoffs in smartphone applications," Economics Letters, Elsevier, vol. 137(C), pages 171-175.
    21. Jentzsch, Nicola, 2015. "What Is Special in the Economics of Cybersecurity and Privacy?," EconStor Research Reports 126227, ZBW - German National Library of Economics.
    22. repec:oup:qjecon:v:132:y:2017:i:2:p:1019-1054. is not listed on IDEAS
    23. Dominik Aaken & Andreas Ostermaier & Arnold Picot, 2014. "Privacy and Freedom: An Economic (Re-)Evaluation of Privacy," Kyklos, Wiley Blackwell, vol. 67(2), pages 133-155, May.
    24. Budzinski, Oliver, 2016. "Aktuelle Herausforderungen der Wettbewerbspolitik durch Marktplätze im Internet," Ilmenau Economics Discussion Papers 103, Ilmenau University of Technology, Institute of Economics.
    25. Tucker, Catherine E., 2012. "The economics of advertising and privacy," International Journal of Industrial Organization, Elsevier, vol. 30(3), pages 326-329.


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