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Consumers' Privacy Choices in the Era of Big Data

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  • Prüfer, Jens

    (Tilburg University, School of Economics and Management)

  • Dengler, Sebastian

    (Tilburg University, School of Economics and Management)

Abstract

Recent progress in information technologies provides sellers with detailed knowledge about consumers' preferences, approaching perfect price discrimination in the limit. We construct a model where consumers with less strategic sophistication than the seller's pricing algorithm face a trade-off when buying. They choose between a direct, transaction cost-free sales channel and a privacy-protecting, but costly, anonymous channel. We show that the anonymous channel is used even in the absence of an explicit taste for privacy if consumers are not too strategically sophisticated. This provides a micro-foundation for consumers' privacy choices. Some consumers benefit but others suffer from their anonymization.
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Suggested Citation

  • Prüfer, Jens & Dengler, Sebastian, 2018. "Consumers' Privacy Choices in the Era of Big Data," Other publications TiSEM 3fac3011-dc4d-4b81-8f66-3, Tilburg University, School of Economics and Management.
  • Handle: RePEc:tiu:tiutis:3fac3011-dc4d-4b81-8f66-32d3b7a3c761
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    Citations

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    Cited by:

    1. MARTENS Bertin, 2020. "An economic perspective on data and platform market power," JRC Working Papers on Digital Economy 2020-09, Joint Research Centre.
    2. Jens Prüfer & Patricia Prüfer, 2020. "Data science for entrepreneurship research: studying demand dynamics for entrepreneurial skills in the Netherlands," Small Business Economics, Springer, vol. 55(3), pages 651-672, October.
    3. Rupayan Pal & Sumit Shrivastav, 2024. "Privacy regulation, cognitive ability, and stability of collusion," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2024-004, Indira Gandhi Institute of Development Research, Mumbai, India.
    4. Bertin Martens, 2018. "The impact of data access regimes on artificial intelligence and machine learning," JRC Working Papers on Digital Economy 2018-09, Joint Research Centre.
    5. Li, Jianpei & Zhang, Wanzhu, 2024. "The Value of Anonymous Option," MPRA Paper 120010, University Library of Munich, Germany.
    6. Bertin Martens & Alexandre de Streel & Inge Graef & Thomas Tombal & Nestor Duch-Brown, 2020. "Business-to-Business data sharing: An economic and legal analysis," JRC Working Papers on Digital Economy 2020-05, Joint Research Centre.
    7. Prüfer, Jens, 2018. "Trusting privacy in the cloud," Information Economics and Policy, Elsevier, vol. 45(C), pages 52-67.

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    More about this item

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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