Abstract
Whilst the majority of online consumers do not seem to take the privacy characteristics of goods and services into account with their consumption choices, a sizeable proportion consider differences in data collection and processing amongst alternative suppliers when deciding where to buy. Meeting their heterogeneous privacy preferences would require varied privacy regimes between different suppliers. Based on an empirical evaluation of 140 web sites across five industries, we consider two questions: (1) can privacy-conscious consumers find a privacy-friendly seller/provider? (2) is this alternative associated with higher prices? We interpret the empirical evidence using the economic model of horizontal differentiation. As an overarching conclusion, differentiation on privacy is more prevalent in markets where consumption is priced—an observation that confirms the prediction from theory. Surprisingly, sellers that collect less data charge lower prices, with high significance. Implications for regulation and for further study are discussed.
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Notes
- 1.
While modern payment cards usually can transparently make payments in foreign currencies, shipping costs often limit consumers to web merchants aimed at their own country. In addition, for both DVDs and digital cameras, which we studied, manufacturers often price products differently in different regions, in the case of DVDs using a specifically designed DRM system (region codes) to facilitate price discrimination.
- 2.
For Flickr, for instance, the first two categories are “Recreation: Outdoors: Urban Exploration: Image Galleries” and “Society: Death: Death Care: Cemeteries: Image Galleries”. Links therein include http://www.flickr.com/groups/abandonded_gas{\_}stations/ or http://www.flickr.com/groups/cemeterygates/. A link to the homepage http://www.flickr.com/ is found in category “Computers: Internet: On the Web: Web Applications: Photo Sharing”, listed 73th and one of only three categories listed under “Computers”.
- 3.
We do not claim that web sites listed in this sub-sample are monopolists, but rather that we were unable to find competing web sites.
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Appendices
Appendix
A.1. DVDs Used for Price Comparison
A.2. Digital Cameras Used for Price Comparison
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Preibusch, S., Bonneau, J. (2013). The Privacy Landscape: Product Differentiation on Data Collection. In: Schneier, B. (eds) Economics of Information Security and Privacy III. Springer, New York, NY. https://doi.org/10.1007/978-1-4614-1981-5_12
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