Hypertargeting, Limited Attention, and Privacy: Implications for Marketing and Campaigning

Florian Hoffmann, Roman Inderst and Marco Ottaviani

No 479, Working Papers from IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University

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).

Date: 2013
New Economics Papers: this item is included in nep-cdm, nep-com, nep-cta, nep-ict, nep-mkt and nep-pol
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