Paper Explores How the Amount of Privacy Affects Industry Profits, Consumer Welfare, and Total Welfare

Oz Shy of the Federal Reserve Bank of Boston and Rune Stenbacka of the Swedish School of Economics and Business Administration have written Customer Privacy and Competition.  Here is the abstract:

We analyze how different degrees of privacy protection affect industry profits, consumer welfare and total  welfare. Firms earn higher profits under weak privacy protection compared with strong or no privacy protection. Therefore, the relationship between the degree of privacy protection and equilibrium profits is not monotonic. Consumers monotonically benefit from an increase in the degree of privacy protection. Finally, total welfare  monotonically increases with the degree of privacy protection.

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