Incentives for Digital Monitoring: A Privacy Model Restricted; Files Only

Abstract

As concerns grow about consumer data protection in the United States, prominent legal scholars have proposed the establishment of fiduciary duties, including a duty of loyalty, for companies that collect and use client data. This paper develops a stylized model to understand the ex-ante incentives of behavioral-advertising companies in the online marketplace when faced with information constraints. By considering and simulating how individuals’ distinct preferences over data-driven personalization might be aggregated by a firm (e.g. Meta), this thesis explores complications of and opportunities for information-restriction as a form of regulation in an increasingly-online world. 

Table of Contents

Table of Contents

Contents

1 Introduction 1

2 Context 3

2.1 The Politics of Data Privacy . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

2.2 Related Modeling Literature . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

3 The Model 9

3.1 Model Basics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

3.2 Maximizing Social Welfare With Uniform Ads . . . . . . . . . . . . . . . . . 11

3.3 Firm Observation of Prior With Uniform Ads . . . . . . . . . . . . . . . . . 12

3.4 Utility Functions For Customer-Indexed Ads . . . . . . . . . . . . . . . . . . 16

4 Simulations 17

4.1 Defining Ex-Ante Information Levels . . . . . . . . . . . . . . . . . . . . . . 17

4.2 Defining an Ensemble of Firm Strategies . . . . . . . . . . . . . . . . . . . . 19

4.3 Simulation Basis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

4.4 Firm Payoffs for Unimodal Beta Distributions . . . . . . . . . . . . . . . . . 24

4.5 Varying Parameters for Customer Preference Distributions . . . . . . . . . . 28

5 Implications and Conclusion 31

6 Appendix 34

6.1 Additional Figures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

6.2 Python . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

Bibliography 42

About this Honors Thesis

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School	Emory College
Department	Political Science and Mathematics
Degree	B.A.
Submission	Honors Thesis
Language	English
Research Field	Political Science, General Mathematics
Keyword	Data Privacy Formal Theory
Committee Chair / Thesis Advisor	John Patty, Emory University
Committee Members	Maggie Penn, Emory University Bree Ettinger, Emory University

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