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Personalization and Privacy Choice

Author

Listed:
  • Rhodes, Andrew
  • Zhou, Jidong

Abstract

This paper studies consumers’ privacy choices when firms can use their data to make personalized offers. We first introduce a general framework of personalization and privacy choice, and then apply it to personalized recommendations, personalized prices, and personalized product design. We argue that due to firms’ reaction in the product market, consumers who share their data often impose a negative externality on other consumers. Due to this privacy-choice externality, too many consumers share their data relative to the consumer optimum; moreover, more competition, or improvements in data security, can lower consumer surplus by encouraging more data sharing.

Suggested Citation

  • Rhodes, Andrew & Zhou, Jidong, 2024. "Personalization and Privacy Choice," TSE Working Papers 24-1525, Toulouse School of Economics (TSE).
    • Handle: RePEc:tse:wpaper:129289
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    References listed on IDEAS

    as
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    3. Michael Kummer & Patrick Schulte, 2019. "When Private Information Settles the Bill: Money and Privacy in Google’s Market for Smartphone Applications," Management Science, INFORMS, vol. 65(8), pages 3470-3494, August.
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    6. Sinem Hidir & Nikhil Vellodi, 2021. "Privacy, Personalization, and Price Discrimination," Journal of the European Economic Association, European Economic Association, vol. 19(2), pages 1342-1363.
    7. Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, vol. 3(2), pages 156-168, June.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    personalization; consumer data; privacy; personalized pricing; personalized recommendations; personalized product design;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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