NSFSaTC-BSF: CORE: Small: The Utilitarian Implications of Privacy Protections

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In recent years the extent of online tracking has come to light, leading to calls for stronger privacy-­protecting regulation and technologies. Privacy advocates argue that the lack of privacy is harmful at individual and societal levels; others argue that privacy protections bring about less information sharing, which leads to a decrease in overall welfare (e.g., a decrease in the efficiency of markets). One major discrepancy between the two viewpoints is that those who advocate for privacy often emphasize the intrinsic value of privacy, whereas those who question the benefits of privacy protections believe it may have a detrimental impact on market outcomes. This project's aim is to bridge the two approaches by analyzing the effects of privacy protections on overall welfare while accounting for the intrinsic benefits of privacy. We utilize formal game-­theoretic models to study the utilitarian implications of privacy protecting technologies and regulation in models wherein the value of privacy is intrinsic. That is, the realized level of privacy is an input to individuals' utility functions. Instituting privacy protections has two effects: a direct effect reflected in greater intrinsic privacy, and an indirect effect arising from the effect on behavior and market outcomes. Our goals are to identify properties of strategic interactions that determine the interplay of these direct and indirect effects. When do they coincide, leading to an overall welfare increase, and when do they collide, possibly leading to a net welfare decrease?