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An economic analysis of user-privacy options in ad-supported services

Feigenbaum, J; Mitzenmacher, M; Zervas, G; (2012) An economic analysis of user-privacy options in ad-supported services. Lecture Notes in Computer Science (including subseries Lecture Notes in Artificial Intelligence and Lecture Notes in Bioinformatics) , 7695 L pp. 30-43. 10.1007/978-3-642-35311-6_3.

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Abstract

We analyze the value to e-commerce website operators of offering privacy options to users, e.g., of allowing users to opt out of ad targeting. In particular, we assume that site operators have some control over the cost that a privacy option imposes on users and ask when it is to their advantage to make such costs low. We consider both the case of a single site and the case of multiple sites that compete both for users who value privacy highly and for users who value it less. One of our main results in the case of a single site is that, under normally distributed utilities, if a privacy-sensitive user is worth at least √2-1 times as much to advertisers as a privacy-insensitive user, the site operator should strive to make the cost of a privacy option as low as possible. In the case of multiple sites, we show how a Prisoner's-Dilemma situation can arise: In the equilibrium in which both sites are obliged to offer a privacy option at minimal cost, both sites obtain lower revenue than they would if they colluded and neither offered a privacy option. © 2012 Springer-Verlag.

Type: Article
Title: An economic analysis of user-privacy options in ad-supported services
DOI: 10.1007/978-3-642-35311-6_3
UCL classification: UCL > Provost and Vice Provost Offices
UCL > Provost and Vice Provost Offices > UCL BEAMS
UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science
UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science > Dept of Electronic and Electrical Eng
URI: http://discovery.ucl.ac.uk/id/eprint/1533737
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