Affiliation:
1. Eitan Berglas School of Economics, Tel Aviv University (emails: )
2. Eitan Berglas School of Economics, Tel Aviv University (email: )
Abstract
A monopolistic firm observes a signal about the state of the world and then makes a take-it-or-leave-it offer to an uninformed consumer who has recourse to some outside option. We provide a geometric characterization of the firm’s information structure that maximizes the consumer’s surplus: the optimal regime partitions the space of payoff states into polyhedral cones with disjoint interiors. We interpret our results in terms of the maximization of the consumer’s “privacy rent.” We illustrate and motivate our approach through the example of the regulation of the privacy of medical information in monopolistic health insurance markets. (JEL D21, D42, D83, G22, I13)
Publisher
American Economic Association
Subject
General Economics, Econometrics and Finance
Cited by
2 articles.
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1. The effect of privacy on market structure and prices;The Journal of Law, Economics, and Organization;2023-10-13
2. An Information Privacy Competency Model for Online Consumers;Lecture Notes in Business Information Processing;2023