Abstract:
I study the market for consumer information. Firms cannot commit to privacy, so buyers anticipate
disclosure of purchase history for targeted pricing. In the literature, strategic rejections
of informative o ers make purchase data worthless, which is paradoxical given the large investments
in data analytics. I show that buyers' uncertainty regarding future preferences allows full
separation of types, leading to valuable purchase data. Buyers of any given type are assumed
to share similar expectations about the evolution of future valuations. Preference uncertainty
generates consumer-to-consumer externalities, which is why strategic consumers are sometimes
better o when they remain unaware of targeted pricing. When preferences are transitory, rms
have an incentive to raise consumer awareness about targeted pricing.
