Consumer Privacy and the Market for Customer Information

Abstract

I investigate consumer privacy and the market for customer information in electronic retailing. The value of customer information derives from the ability of Internet firms to identify individual consumers and charge them personalized prices. I study two settings, a confidential regime in which the sale of customer information is not possible, and a disclosure regime in which one firm may compile and sell a customer list to another firm that uses it to price discriminate. Welfare comparisons depend critically on whether consumers anticipate sale of the list and on demand elasticity.