IDEAS home Printed from https://ideas.repec.org/p/van/wpaper/0809.html
   My bibliography  Save this paper

Privacy, Publicity, and Choice

Author

Listed:
  • Andrew F. Daughety

    () (Department of Economics and Law School, Vanderbilt University)

  • Jennifer F. Reinganum

    () (Department of Economics and Law School, Vanderbilt University)

Abstract

We develop and explore a new model of the economics of privacy. Previous work has focused on "privacy of type," wherein an agent privately knows an immutable characteristic. We consider "privacy of action," wherein privacy means that an agent's choice of action is unobservable to others. To show how a policy of privacy can be socially optimal, we assume that an agent derives utility from an action he takes, from the aggregate of all agents' actions, and from other agents' perceptions of the agent's type (that are based on his action). If his action is observable, then he distorts it (relative to his full-information optimal action) so as to enhance the perceptions that others have of him. This contributes to aggregate welfare through increasing the public good, but the disutility associated with the distortion of agents' actions is also a social cost. If his action is unobservable, then he can take his full-information optimal action and still be "pooled" with other types. When the disutility of distortion is high relative to the marginal utility of the public good, a policy of privacy is optimal. We also consider a policy of waivable privacy, and find that equilibria exist in which some, but not all, types waive privacy. More significantly, if policies of privacy or publicity are costlessly enforceable, then a policy of waivable privacy is never socially preferred. Finally, we consider a number of examples (some of which involve a public bad and/or social disapproval): open-source software development; charitable giving; recycling; consumption of health services; DNA dragnets; student rankings; constraints on information disclosure at trial; electricity and water usage during periods of voluntary rationing; shaming of speeders; and the use of earmarks by Congress.

Suggested Citation

  • Andrew F. Daughety & Jennifer F. Reinganum, 2008. "Privacy, Publicity, and Choice," Vanderbilt University Department of Economics Working Papers 0809, Vanderbilt University Department of Economics.
  • Handle: RePEc:van:wpaper:0809
    as

    Download full text from publisher

    File URL: http://www.accessecon.com/pubs/VUECON/vu08-w09.pdf
    File Function: First version, 2008
    Download Restriction: no

    References listed on IDEAS

    as
    1. Richard A. Posner, 1978. "The Right to Privacy," University of Chicago - George G. Stigler Center for Study of Economy and State 2, Chicago - Center for Study of Economy and State.
    2. Andrew F. Daughety & Jennifer F. Reinganum, 1995. "Keeping Society in the Dark: On the Admissibility of Pretrial Negotiations as Evidence in Court," RAND Journal of Economics, The RAND Corporation, vol. 26(2), pages 203-221, Summer.
    3. Leslie M. Marx & Steven A. Matthews, 2000. "Dynamic Voluntary Contribution to a Public Project," Review of Economic Studies, Oxford University Press, vol. 67(2), pages 327-358.
    4. Alessandro Acquisti & Hal R. Varian, 2005. "Conditioning Prices on Purchase History," Marketing Science, INFORMS, vol. 24(3), pages 367-381, May.
    5. Andrew F. Daughety & Jennifer F. Reinganum, 2008. "Communicating quality: a unified model of disclosure and signalling," RAND Journal of Economics, RAND Corporation, vol. 39(4), pages 973-989.
    6. Linardi, Sera & McConnell, Margaret A., 2008. "Volunteering and image concerns," Working Papers 1282, California Institute of Technology, Division of the Humanities and Social Sciences.
    7. Vesterlund, Lise, 2003. "The informational value of sequential fundraising," Journal of Public Economics, Elsevier, vol. 87(3-4), pages 627-657, March.
    8. Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, January.
    9. 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.
    10. Curtis R. Taylor, 2004. "Consumer Privacy and the Market for Customer Information," RAND Journal of Economics, The RAND Corporation, vol. 35(4), pages 631-650, Winter.
    11. Andreoni, James, 1989. "Giving with Impure Altruism: Applications to Charity and Ricardian Equivalence," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1447-1458, December.
    12. Harbaugh, William T., 1998. "What do donations buy?: A model of philanthropy based on prestige and warm glow," Journal of Public Economics, Elsevier, vol. 67(2), pages 269-284, February.
    13. Grossman, Sanford J, 1981. "The Informational Role of Warranties and Private Disclosure about Product Quality," Journal of Law and Economics, University of Chicago Press, vol. 24(3), pages 461-483, December.
    14. Paul R. Milgrom, 1981. "Good News and Bad News: Representation Theorems and Applications," Bell Journal of Economics, The RAND Corporation, vol. 12(2), pages 380-391, Autumn.
    15. Calzolari, Giacomo & Pavan, Alessandro, 2006. "On the optimality of privacy in sequential contracting," Journal of Economic Theory, Elsevier, vol. 130(1), pages 168-204, September.
    16. Romano, Richard & Yildirim, Huseyin, 2001. "Why charities announce donations: a positive perspective," Journal of Public Economics, Elsevier, vol. 81(3), pages 423-447, September.
    17. Michael Spence, 1973. "Job Market Signaling," The Quarterly Journal of Economics, Oxford University Press, vol. 87(3), pages 355-374.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Privacy; public goods; disclosure; signaling; esteem;

    JEL classification:

    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • K39 - Law and Economics - - Other Substantive Areas of Law - - - Other
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:van:wpaper:0809. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (John P. Conley). General contact details of provider: http://www.vanderbilt.edu/econ/wparchive/index.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.