The Unintended Consequences of Behavior-Based Pricing under Informed Privacy Consent

Summary

Explore the implications of informed privacy consent on behavior-based pricing (BBP) with this new MSI working paper. It highlights how privacy regulations requiring consumer consent before data collection impact pricing strategies and consumer surplus. The research finds that while informed consent empowers consumers, it paradoxically reduces overall consumer surplus by reducing the potential benefits of customized offers.

The study also reveals that firms can achieve higher profits by offering rewards for privacy consent, despite the associated costs. This underscores the complexity of privacy regulations and their unintended consequences on market dynamics and consumer welfare.