Consumer Information and Privacy

Computer technologies enable sellers to find out more about their customers while at the same time they enable buyers to search and receive product information. The balance is certainly in favor of sellers since product information are proprietary, implying they are offered only if sellers want to. On the other hand, information about online consumers seem to flow easily to sellers if technologies are not employed to block such transfer. Since there are sizable gains to be made from refining consumer demand information, collecting information about consumer preferences is widely promoted, and electronic commerce provides a unique opportunity for this. But, while this information is clearly helpful to the sellers and researchers, a standard must be established to protect consumers. Presently, simple notification and disclosure to consumers are all that is needed for information collectors to use such consumer information.

Rather than relying on regulatory solutions, however, innovative concepts are being tested in electronic commerce. One new idea is to give consumers the right to sell their own information. As discussed in Section 8.3, this market-based solution turns personal information into a marketable commodity. Many online services are offered in return for divulging personal information. In that case, the price for that information will be equal to the value of the service offered. Some consumers may use the service heavily, implying a high price for their information. Others may give out their information for a service they seldom use, signaling a low value for their personal information. Going beyond reporting names and addresses, consumers may be willing to sell all types of consumption data in the future if the price is right. In a way, consumers will become information sellers by participating in market research or focus groups.

At least in one sense, selling personal consumption data may be detrimental to consumer welfare. In electronic commerce, such data will be directly linked to purchasing and price negotiation. With demand known, sellers may refuse to lower prices below what they think is a consumer's valuation. However, rather than going back to a market with imperfect demand and inferior product quality, the market may be able to produce an equitable and efficient result. For example, the potentially higher sale price can be partly compensated by a higher payment for personal information. This also demonstrates a reason why consumer information may have to be priced and traded in the market. A slew of economic questions arise regarding prices and the efficiency in such a market. Perhaps, the vigor evidenced in the debate on privacy and anonymity among legal scholars, government officials and free speech activists might guide economists to this task in the future.

Privacy on the Internet

Privacy & Anonymity FAQ: Available through anonymous FTP to pit-manager@mit.edu, in the directory /pub/usenet/news.answers/net-privacy/. Internet Privacy Coalition's mission "is to promote privacy and security on the Internet through widespread public availability of strong encryption and the relaxation of export controls on cryptography." Electronic Privacy Information Center (EPIC) is "a public interest research center in Washington, D.C. It was established in 1994 to focus public attention on emerging civil liberties issues and to protect privacy, the First Amendment, and constitutional values." Electronic Frontier Foundation (EFF) maintains an extensive database of materials related to the privacy issue on the Internet including texts of proposed legislation. These files may be obtained through its Web page or via anonymous FTP to ftp.eff.org in the /pub directory. A 1996 Georgia Tech survey found that many Web users are against disclosing their personal information.