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The customer economics of internet privacy


The World Wide Web has significantly reduced the costs of obtaining information about individuals, resulting in a widespread perception by consumers that their privacy is being eroded. The conventional wisdom among the technological cognoscenti seems to be that privacy will continue to erode, until it essentially disappears. The authors use a simple economic model to explore this conventional wisdom, under the assumption that there is no government intervention and privacy is left to free-market forces. They find support for the assertion that, under those conditions, the amount of privacy will decline over time and that privacy will be increasingly expensive to maintain. The authors conclude that a market for privacy will emerge, enabling customers to purchase a certain degree of privacy, no matter how easy it becomes for companies to obtain information, but the overall amount of privacy and privacy-based customer utility will continue to erode.

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Roland T. Rust (Ph.D., University of North Carolina at Chapel Hill) holds the David Bruce Smith Chair in Marketing at the Robert H. Smith School of Business at the University of Maryland, where he directs the Center for e-Service. His lifetime achievement honors include the American Marketing Association’s (AMA’s) Gilbert A. Churchill Award for contributions to marketing research, the Outstanding Contributions to Research in Advertising Award from the American Academy of Advertising, Fellow of the American Statistical Association, the AMA Career Contributions to the Services Discipline Award, and the Henry Latané Distinguished Doctoral Alumnus Award from the University of North Carolina at Chapel Hill. He has won best article awards for articles inMarketing Science, Journal of Marketing Research, Journal of Marketing, Journal of Advertising, andJournal of Retailing, as well as the Marketing Science Institute (MSI) Best Paper Award. His seven books includee-Service, Driving Customer Equity, Service Marketing, andReturn on Quality. His work has received extensive media coverage, including aBusiness Week cover story and an appearance onABC World News Tonight With Peter Jennings. He is the founder and chair of the AMA Frontiers in Services Conference and serves as founding editor of theJournal of Service Research. Professor Rust also is an area editor atMarketing Science and serves on the editorial review boards of theJournal of Marketing Research, Journal of Marketing, and theJournal of Interactive Marketing.

P. K. Kannan (Ph.D., Purdue University) is Safeway Fellow and Associate Professor of Marketing at the Robert H. Smith School of Business at the University of Maryland, where he is the associate director of the Center for E-Service. His research focuses on e-commerce, centering on marketing information services on the Internet, pricing information products, and marketing and product development in virtual communities. He is working with the IBM Institute for Advanced Commerce on e-couponing and also with National Academy Press on pricing information products. He is an associate editor ofDecision Support Systems and Electronic Commerce and serves on the editorial board of theJournal of Service Research and theInternational Journal of Electronic Commerce. He is currently editing a special issue on marketing in the e-channel for theInternational Journal of Electronic Commerce. He is the chair for the American Marketing Association Special Interest Group on Marketing Research. He has corporate experience with Tata Engineering and Ingersoll-Rand and has consulted for companies such as Frito-Lay, Pepsi Co, Giant Food, SAIC, Fannie Mae, Proxicom, and IBM.

Na Peng is a doctoral student at the University of Maryland.

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Rust, R.T., Kannan, P.K. & Peng, N. The customer economics of internet privacy. J. of the Acad. Mark. Sci. 30, 455–464 (2002).

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  • Personal Information
  • Privacy Protection
  • Privacy Market
  • Customer Information
  • Market Science Fall