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Online Privacy and Information Disclosure by Consumers

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  • Shota Ichihashi

Abstract

I study the welfare and price implications of consumer privacy. A consumer discloses information to a multi-product seller, which learns about the consumer’s preferences, sets prices, and makes product recommendations. While the consumer benefits from accurate product recommendations, the seller may use the information to price discriminate. I show that the seller prefers to commit to not using consumer information for pricing to encourage information disclosure. However, this commitment hurts the consumer, who could be better off by pre-committing to withhold some information. In contrast to single-product models, total surplus may be lower if the seller can base prices on information.

Suggested Citation

  • Shota Ichihashi, 2019. "Online Privacy and Information Disclosure by Consumers," Staff Working Papers 19-22, Bank of Canada.
    • Handle: RePEc:bca:bocawp:19-22
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    References listed on IDEAS

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    More about this item

    Keywords

    Economic models;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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