The Economics of Privacy: Theoretical and Empirical Aspects

This chapter considers the growing body of theoretical and empirical research on the economics and behavioral economics of privacy, and how those streams of research can be applied to the investigation of the economic implications of business analytics and consumer data mining. The chapter begins by highlighting why privacy-sensitive scenarios and outcomes can be often interpreted through economic lenses. It then summarizes micro economic approaches to privacy. It continues by describing the current markets for privacy and personal data, consumers’ privacy valuations and behaviors, and the potential trade-offs associated with those behaviors. It concludes by discussing the role of privacy enhancing technologies and market forces in balancing the value of data and the value of privacy. ∗Carnegie Mellon University, [email protected]