Economics of Identity Management: A Supply-Side Perspective
In an online world, the temptation to exploit customer information for marketing purposes is a strong argument for customers to use a privacy enhancing identity management system. However, the success of this technology depends on the support from the vendors as well. Apart from practical aspects, such as usability, trustworthiness, and standardisation, economic aspects play a key role in this decision. This paper examines the cost-utility trade-off from a supply-side perspective with micro-economic models. Albeit still limited to the case of a monopolist supplier, we reflect the impact of different customer preferences towards privacy, and the possibility to implement price discrimination.
KeywordsPrice Strategy Demand Curve Identity Management Price Discrimination Customer Information
Unable to display preview. Download preview PDF.
- 1.Acquisti, A.: Security of Personal Information and Privacy: Technological Solutions and Economic Incentives. In: Camp, J., Lewis, R. (eds.) The Economics of Information Security. Kluwer, Dordrecht (2004)Google Scholar
- 2.Acquisti, A., Varian, H.: Conditioning Prices on Purchase History (2001), http://www.heinz.cmu.edu/~acquisti/papers/privacy.pdf
- 6.Electronic Privacy Information Center (EPIC): Public Opinion on Privacy, http://www.epic.org/privacy/survey/
- 7.Gellman, R.: Privacy, Consumers, and Costs (2002), http://www.epic.org/reports/dmfprivacy.html
- 9.Mankiw, N.G.: Principles of Economics. South-Western, Mason (2004)Google Scholar
- 10.Odlyzko, A.: Privacy, Economics, and Price Discrimination on the Internet. In: Fifth International Conference on Electronic Commerce, pp. 355–366. ACM, New York (2003)Google Scholar
- 11.Pindyck, R., Rubinfeld, D.: Microeconomics. Prentice Hall, London (1998)Google Scholar
- 12.Privacy and Identity Management for Europe (PRIME), http://www.prime-project.eu.org/
- 13.Shapiro, C., Varian, H.: Information Rules: A Strategic Guide to the Network Economy. Harvard Business School Press (1998)Google Scholar
- 14.Taylor, C.R.: Private Demands and Demands for Privacy: Dynamic Pricing and the Market for Customer Information. Department of Economics, Duke University, Duke Economics Working Paper 02-02 (2002)Google Scholar
- 15.Varian, H.: Intermediate Microeconomics. W.W. Norton & Company, New York (2003)Google Scholar
- 16.Varian, H., Wallenberg, F., Woroch, G.: Who Signed Up for the Do-Not-Call List? In: Paper presented at the Third Workshop on Economics and Information Security, University of Minnesota (2004), http://www.dtc.umn.edu/weis2004/varian.pdf