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Privacy And Endogenous Monitoring Choice When Private Information Is A Public Good

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  • Stefan Dodds

    (Department of Economics, Queen's University)

Abstract

This paper examines why economies endow agents with a degree of personal privacy, even when (a) "no privacy" is ex-post (Pareto) efficient, and (b) a costless monitoring technology exists. A government can provide more of a public good only by identifying "valuable" agents from a population of n. All agents report their type to the government --- truthfully or not --- unsure if they, or others, are being observed. When n is small, it is shown that increasing monitoring effectiveness can actually lead to ex-post inefficiency. Political equilibria are also characterized, where agents vote to constrain the government's monitoring effectivenes but not its ability to levy penalties or rewards. When n is large, all such equilibria are efficient; however, a utilitarian government may not implement taxes to reward honest reporting, nor impose penalties to punish it, even when these options ensure full revelation. Legislating a "right to privacy", by contrast, is always inefficient.

Suggested Citation

  • Stefan Dodds, 2002. "Privacy And Endogenous Monitoring Choice When Private Information Is A Public Good," Working Paper 1010, Economics Department, Queen's University.
    • Handle: RePEc:qed:wpaper:1010
    as

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    File URL: https://www.econ.queensu.ca/sites/econ.queensu.ca/files/qed_wp_1010.pdf
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    References listed on IDEAS

    as
    1. Robin Boadway & Motohiro Sato, 2000. "The Optimality of Punishing Only the Innocent: The Case of Tax Evasion," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 7(6), pages 641-664, December.
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    3. Posner, Richard A, 1981. "The Economics of Privacy," American Economic Review, American Economic Association, vol. 71(2), pages 405-409, May.
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    More about this item

    Keywords

    Tagging; Public Goods; Privacy;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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