Consumers' privacy choices in the era of big data

Sebastian Dengler, Jens Prüfer

Research output: Contribution to journalArticlepeer-review

1 Citation (Scopus)

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.

Original languageEnglish
Pages (from-to)499-520
Number of pages22
JournalGames and Economic Behavior
Volume130
Early online date6 Oct 2021
DOIs
Publication statusPublished - Nov 2021

Keywords

  • Big data
  • Level-k thinking
  • Perfect price discrimination
  • Privacy

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