Privacy and Personalization in a Dynamic Model
Yufei Chen
What the paper says
This paper studies a two-period model with a monopolist and a consumer. The firm makes two offers (product-price pairs) in the first period and makes one offer in the second period. The single consumer’s type is unknown to the firm, and she chooses at most one offer each period. Products are horizontally differentiated and the consumer prefers products closer to her type. Two privacy settings are considered. In one setting, the consumer cannot hide her purchase history (i.e., cannot opt out) whereas she can in the other setting. We characterize the firm-optimal equilibria in both settings and show that when the opt-out choice is added, the ex-ante producer surplus and social surplus increase while the ex-ante consumer surplus decreases. How the interim consumer surplus changes depends on her type. Our results suggest that, in some cases, privacy protection tools may inadvertently harm consumers while benefiting firms. Therefore, regulators should account for the dynamic and strategic interactions between these two sides when evaluating the implications of such tools.
Evidence weight
Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40
| F · citation impact | 0.50 × 0.4 = 0.20 |
| M · momentum | 0.50 × 0.15 = 0.07 |
| V · venue signal | 0.50 × 0.05 = 0.03 |
| R · text relevance † | 0.50 × 0.4 = 0.20 |
† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.