Working Paper: CEPR ID: DP15072
Authors: Bruno Jullien; Yassine Lefouili; Michael Riordan
Abstract: A website monetizes information it collects about its customers by charging thirdparties for targeted access to them. Allowing for third parties who are well-intentioned,a nuisance, or even malicious, the resulting consumer experiences might be good, bad,or neutral. As consumers learn from experience, the website especially risks losingthose customers who su¤er a bad experience. Customer retention thus motivatesthe website to be cautious about monetization, or to spend resources to screen thirdparties. We study the websites equilibrium privacy policy, its welfare properties,competition in the market for information, and the impact of regulations improvingtransparency and consumer control.
Keywords: privacy policy; consumer retention; personal data; regulation
JEL Codes: D83; L15; L51
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| website's privacy policy (K24) | consumer retention (M51) |
| monetizing consumer data (D16) | negative consumer experiences (D18) |
| negative consumer experiences (D18) | consumer retention (M51) |
| bad experience (Y70) | beliefs about vulnerability to future intrusions (F52) |
| beliefs about vulnerability to future intrusions (F52) | consumer retention (M51) |
| website's precaution level (Y50) | negative consumer experiences (D18) |
| website's precaution level (Y50) | consumer retention (M51) |
| regulatory measures (G18) | website's precaution levels (Y50) |
| website's precaution levels (Y50) | consumer retention (M51) |