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The Price of Privacy

Author

Listed:
  • Annika Baumann

    (Humboldt University of Berlin)

  • Johannes Haupt

    (Humboldt University of Berlin)

  • Fabian Gebert

    (Akanoo GmbH)

  • Stefan Lessmann

    (Humboldt University of Berlin)

Abstract

The analysis of clickstream data facilitates the understanding and prediction of customer behavior in e-commerce. Companies can leverage such data to increase revenue. For customers and website users, on the other hand, the collection of behavioral data entails privacy invasion. The objective of the paper is to shed light on the trade-off between privacy and the business value of customer information. To that end, the authors review approaches to convert clickstream data into behavioral traits, which we call clickstream features, and propose a categorization of these features according to the potential threat they pose to user privacy. The authors then examine the extent to which different categories of clickstream features facilitate predictions of online user shopping patterns and approximate the marginal utility of using more privacy adverse information in behavioral prediction models. Thus, the paper links the literature on user privacy to that on e-commerce analytics and takes a step toward an economic analysis of privacy costs and benefits. In particular, the results of empirical experimentation with large real-world e-commerce data suggest that the inclusion of short-term customer behavior based on session-related information leads to large gains in predictive accuracy and business performance, while storing and aggregating usage behavior over longer horizons has comparably less value.

Suggested Citation

  • Annika Baumann & Johannes Haupt & Fabian Gebert & Stefan Lessmann, 2019. "The Price of Privacy," Business & Information Systems Engineering: The International Journal of WIRTSCHAFTSINFORMATIK, Springer;Gesellschaft für Informatik e.V. (GI), vol. 61(4), pages 413-431, August.
  • Handle: RePEc:spr:binfse:v:61:y:2019:i:4:d:10.1007_s12599-018-0528-2
    DOI: 10.1007/s12599-018-0528-2
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    References listed on IDEAS

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    Cited by:

    1. Haupt, Johannes & Lessmann, Stefan, 2022. "Targeting customers under response-dependent costs," European Journal of Operational Research, Elsevier, vol. 297(1), pages 369-379.
    2. Haupt, Johannes & Lessmann, Stefan, 2020. "Targeting Cutsomers Under Response-Dependent Costs," IRTG 1792 Discussion Papers 2020-005, Humboldt University of Berlin, International Research Training Group 1792 "High Dimensional Nonstationary Time Series".
    3. Moritz Zahn & Stefan Feuerriegel & Niklas Kuehl, 2022. "The Cost of Fairness in AI: Evidence from E-Commerce," Business & Information Systems Engineering: The International Journal of WIRTSCHAFTSINFORMATIK, Springer;Gesellschaft für Informatik e.V. (GI), vol. 64(3), pages 335-348, June.
    4. Johannes Haupt & Stefan Lessmann, 2020. "Targeting customers under response-dependent costs," Papers 2003.06271, arXiv.org, revised Aug 2021.

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