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Private Demands and Demands for Privacy: Dynamic Pricing and the Market for Customer Information

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  • Taylor, Curtis R.

Abstract

Consumer privacy and the market for customer information in electronic retailing are investigated. The value of customer information derives from the ability of firms to identify individual consumers and charge them personalized prices. Two settings are studied, a closed privacy regime in which sale of customer information is forbidden and an open privacy regime in which it is permitted. Consumers fare poorly and firms fare well under an open privacy regime when consumers are myopic. In such settings the opportunity to sell information often gives firms incentives to charge 'experimental' prices. When consumers are farsighted relative to firms, however, they may undermine the market for customer information by strategically rejecting offers. In this case, firms are always better off committing to keep customer information private.

Suggested Citation

  • Taylor, Curtis R., 2002. "Private Demands and Demands for Privacy: Dynamic Pricing and the Market for Customer Information," Working Papers 02-02, Duke University, Department of Economics.
  • Handle: RePEc:duk:dukeec:02-02
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    Cited by:

    1. Fischer-Hubner, S. & Hedbom, H. & Hansen, M. & Hogben, G. & Andersson, C. & Leenes, R.E. & Kosta, E. & Fairchild, A.M. & Ribbers, P.M.A. & Keller, P. & Priem, B.P. & Oomen, I.C. & Kuczerawy, A. & Tsen, 2008. "PRIME Framework V3," Other publications TiSEM 2ede613f-a6e7-447c-874b-9, Tilburg University, School of Economics and Management.
    2. Il-Horn Hann & Kai-Lung Hui & Sang-Yong Tom Lee & Ivan Png, 2005. "Consumer Privacy and Marketing Avoidance," Industrial Organization 0503009, University Library of Munich, Germany.
    3. Qiu_Hong Wang & Kai-Lung Hui, 2005. "Technology Timing and Pricing In the Presence of an Installed Base," Industrial Organization 0512013, University Library of Munich, Germany.
    4. Alessandro Acquisti & Hal R. Varian, 2005. "Conditioning Prices on Purchase History," Marketing Science, INFORMS, vol. 24(3), pages 367-381, May.

    More about this item

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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