The Effect of Privacy on Market Structure and Prices

Speaker
Daniel Bird
Date
16/05/2023 - 12:30 - 11:00Add To Calendar 2023-05-16 11:00:00 2023-05-16 12:30:00 The Effect of Privacy on Market Structure and Prices Protection of consumers’ privacy is often motivated by the fear that, without it, consumers may be exploited via personalized pricing. However, personalized pricing seems to be rare in practice. We explain how privacy nevertheless affects prices in search markets through its effect on market structure. If privacy is not protected, then in addition to consumer search, firms may engage in targeted advertising. We show that privacy protection reduces consumer surplus if firms price discriminate between the search and advertising markets. Absent such discrimination, privacy protection may either increase or decrease consumer surplus. We relate our results to the “privacy paradox.” Joint with Zvika Neeman. BIU Economics common room אוניברסיטת בר-אילן - Department of Economics Economics.Dept@mail.biu.ac.il Asia/Jerusalem public
Place
BIU Economics common room
Affiliation
Tel Aviv University
Abstract

Protection of consumers’ privacy is often motivated by the fear that, without it, consumers may be exploited via personalized pricing. However, personalized pricing seems to be rare in practice. We explain how privacy nevertheless affects prices in search markets through its effect on market structure. If privacy is not protected, then in addition to consumer search, firms may engage in targeted advertising. We show that privacy protection reduces consumer surplus if firms price discriminate between the search and advertising markets. Absent such discrimination, privacy protection may either increase or decrease consumer surplus. We relate our results to the “privacy paradox.”

Joint with Zvika Neeman.

Last Updated Date : 09/05/2023