Protecting Online Privacy: Self Regulation, Mandatory Standards, or Caveat Emptor. Zhulei Tang, Carnegie Mellon University Yu (Jeffrey) Hu, MIT Michael D. Smith, Carnegie Mellon University. Consumers’ Privacy Concerns.
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Zhulei Tang, Carnegie Mellon University
Yu (Jeffrey) Hu, MIT
Michael D. Smith, Carnegie Mellon University
The Monopolistic Retailer Online
Different costs of protecting privacy: cL &cH
Choose optimal price pL &pH
A: binary action—protect or not
Consumers (two segments)
Incur a loss L if privacy not protected
Willingness to pay v~U[0,1]The Model—Basic Setting
Seal-of-approval is optimal under moderate privacy sensitivity;
Mandated standards are optimal under high privacy sensitivity .
Austin Hill, president of Zero-Knowledge Systems (WSJ 2002/06/12)