| Abstract: |
Using personal data collected on the internet, fi?rms and political
campaigners are able to tailor their communication to the preferences and
orientations of individual consumers and voters, a practice known as
hypertargeting. This paper models hypertargeting as selective disclosure of
information to an audience with limited attention. We characterize the private
incentives and the welfare impact of hypertargeting depending on the wariness
of the audience, on the intensity of competition, and on the feasibility of
price discrimination. We show that policy intervention that bans the
collection of personally identi?able data (for example, through stricter
privacy laws requiring user consent) is bene?ficial when consumers are naive,
competition is limited, and fi?rms are able to price discriminate. Otherwise,
privacy regulation often back?fires. Keywords: Hypertargeting, selective
disclosure, limited attention, consumer privacy regulation, personalized
pricing, competition. JEL Classi?fication: D83 (Search; Learning; Information
and Knowledge; Communication; Belief), M31 (Marketing), M38 (Government Policy
and Regulation). |