PRIVACY ON THE INTERNET: AN ECONOMIC ANALYSIS

Journal of the Academy of Marketing Science, 2002

The World Wide Web has significantly reduced the costs of obtaining information about individuals, resulting in a widespread perception by consumers that their privacy is being eroded. The conventional wisdom among the technological cognoscenti seems to be that privacy will continue to erode, until it essentially disappears. The authors use a simple economic model to explore this conventional wisdom, under the assumption that there is no government intervention and privacy is left to free-market forces. They find support for the assertion that, under those conditions, the amount of privacy will decline over time and that privacy will be increasingly expensive to maintain. The authors conclude that a market for privacy will emerge, enabling customers to purchase a certain degree of privacy, no matter how easy it becomes for companies to obtain information, but the overall amount of privacy and privacy-based customer utility will continue to erode. The advance of civilization is nothing but an exercise in the limiting of privacy.-Isaac Asimov Civilization is the progress toward a society of privacy.-Ayn Rand Science fiction writer Isaac Asimov and political novelist Ayn Rand take opposite sides with respect to the eventual outcome with respect to privacy. It is clearly the case,

Journal of Economic Literature, 2016

This article summarizes and draws connections among diverse streams of theoretical and empirical research on the economics of privacy. We focus on the economic value and consequences of protecting and disclosing personal information, and on consumers' understanding and decisions regarding the trade-offs associated with the privacy and the sharing of personal data. We highlight how the economic analysis of privacy evolved over time, as advancements in information technology raised increasingly nuanced and complex issues. We find and highlight three themes that connect diverse insights from the literature. First, characterizing a single unifying economic theory of privacy is hard, because privacy issues of economic relevance arise in widely diverse contexts. Second, there are theoretical and empirical situations where the protection of privacy can both enhance and detract from individual and societal welfare. Third, in digital economies, consumers' ability to make informed decisions about their privacy is severely hindered because consumers are often in a position of imperfect or asymmetric information regarding when their data is collected, for what purposes, and with what consequences. We conclude the article by highlighting some of the ongoing issues in the privacy debate of interest to economists.

The Economics of Privacy, 2024

By several accounts, the economics of privacy has grown into a remarkably successful field of research. As the means of collecting and using individuals’ data have expanded, so has the body of work investigating trade-offs associated with those data flows. The number of scholars working in the area has grown, much like the breadth of topics investigated. References to the economic value of personal data have become common in policy and regulation, and so have mentions of economic dimensions of privacy problems. Thinly veiled underneath those successes, however, lies a less encouraging trend. In this manuscript, I argue that the very success of the economics of privacy has laid the foundation for a potentially adverse effect on the public debate around privacy. Economic arguments have become central to the debate around privacy. When used as complements to considerations less amenable to economic quantification, those arguments are valuable tools: they capture a portion of the multiform implications of evolving privacy boundaries. When, instead, economic arguments crowd out those other noneconomic considerations from the public discourse around privacy, problematic scenarios arise. In one scenario, the economic analysis of privacy will keep growing in influence, but its overly narrow conception of privacy will impoverish rather than augment the depth of the debate around privacy. In a second scenario, less likely but equally problematic, the economics of privacy will progressively undermine its own relevance by failing to account for the complexity and nuance of modern privacy problems. There is a third scenario—one this manuscript explores. The economics of privacy may expand its horizons and relevance both by considering economic dimensions and research questions that have so far received limited attention, and by accounting for the broader scholarship on privacy coming from other disciplines. As a complement to the contributions of other fields, rather than a substitute for them, the economics of privacy may keep thriving and remain a useful tool for debate and policymaking.

papers.ssrn.com

IEEE Security & Privacy Magazine, 2000

Journal of Management Information …, 2007

He received his Ph.D. from the University of Texas at Austin. Dr. Chellappa's expertise is in the field of electronic markets, digital goods pricing, and economics of information security and privacy. His research on piracy has been widely published in leading journals and conferences. His work on information privacy in online transactions received the Best Paper Award at INFORMS-CIST 2003. Professor Chellappa works closely with the music industry on topics related to forecasting, piracy, supply-chain management, and iTunes/digital sales. He currently teaches in the MBA and Ph.D. programs at Emory and he recently designed and taught a course on IT and medicine in the Medical Management Program at the University of Southern California. Motivation Wit h t echnol ogical advances, t her e has been a cal l for regulating information collection and usage by online firms. Many privacy watchdog groups, such as the Center for Digital Democracy (CDD; www.democraticmedia.org), U.S. Public Interest Research Group (U.S. PIRG; www.uspirg.org), and Electronic Privacy Information Center (EPIC; www.epic.org), have taken the view that privacy-related information * * .

First Monday, 2012

Since there is, in principle, no reason why third parties should not pay individuals for the use of their data, we introduce a realistic market that would allow these payments to be made while taking into account the privacy attitude of the participants. And since it is usually important to use unbiased samples to obtain credible statistical results, we examine the properties that such a market should have and suggest a mechanism that compensates those individuals that participate according to their risk attitudes. Equally important, we show that this mechanism also benefits buyers, as they pay less for the data than they would if they compensated all individuals with the same maximum fee that the most concerned ones expect.

2011 44th Hawaii International Conference on System Sciences, 2011

We explore consumer trade-offs between better performance through tailoring of online services to their individual needs and greater privacy as a result of reduced disclosure of personal information. We show that individuals have different willingness to accept loss of privacy that is a function of (1) the individual and his/ her preferences, because the variation in demands for privacy is not uniform across individuals, (2) the service Domain, because individuals demand more privacy in some Domains than they do in others and (3) these differences themselves differ among consumers as well.

Information Systems Frontiers, 2007

The importance of personal privacy to Internet users has been extensively researched using a variety of survey techniques. The limitations of survey research are well-known and exist in part because there are no positive or negative consequences to responses provided by survey participants. Such limitations are the motivation for this work. Experimental economics is widely accepted by economists and others as an investigative technique that can provide measures of economic choice-making that are substantially more accurate than those provided by surveys. This paper describes our efforts at applying the techniques of experimental economics to provide a foundation for (a) estimating the values that consumers place on privacy and various forms of security (encryption, HIPAA, etc.) and for (b) quantifying user responses to changes in the Internet environment. The contribution of this study is a better understanding of individual decision-making in the context of benefits and costs of making private information available to Internet sites. Preliminary results from a series of pilot studies are consistent with optimizing behaviors, indicating that continued application of experimental economics techniques in the quantification of Internet user actions in privacy/security space will be illuminating. Our results show that Internet users place great value on security measures, both regulatory and technical, that make identity theft much less likely. Our Web-based experiments indicate that privacy-and security-enhancing protections are likely to be subject to moral hazard responses, as participants in our online experiments became more aggressive in their Internet usage with greater protection in place.