Page 326 - DMGT308_CUSTOMER_RELATIONSHIP_MANAGEMENT

Unit 12: Customer Privacy

A second objection is that consumers have asymmetric knowledge relative to business about the Notes
value of their personal information, and that they consequently would be exploited (Gandy,
1996). The holders of this view discount the information-revealing process of competition. They
must assume chronic oligopolistic behaviour by business firms. Because such asymmetry in
information would extend to all other dimensions of transactions as well, this view, to be
consistent must be deeply skeptical of informed consent in consumer transactions generally.
The third objection to transactions in privacy is that they disproportionately harm the poor.
Here, it is believed that it is especially those suffering from financial pressures and ignorance
will sell their privacy rights to rich individuals and institutions. It is, of course, true that a poor
person’s priorities may often not include privacy protection. (In other cases, however, the
opposite may hold and poor people need privacy more than those who can afford to create
protective physical and organizational walls for themselves.) On the other hand, the same
poverty condition may also make a poor person an unattractive target for a commercial intrusion.
Telemarketers will prefer to make a pitch to individuals who can afford their products. The poor
are best helped by money; to micromanage their condition through restricting their right to
transact may well end up a patronizing social policy and inefficient economic policy. This leads
to a conclusion that privacy, being a broad umbrella for a variety of issues, cannot be dealt with
in a single fashion. Where transactions are not forthcoming, indicating a structural market
failure, (perhaps due to monopoly or high transaction costs), or where negative externalities are
large, regulations can be appropriate that reflect the policy preferences of the community for
privacy and as well as for other values. But it must be recognized that, given the initial logic of
the exchange transactions, they will find a way to assert themselves in other ways, thus
undercutting the actual effect of the restriction and leaving them more in the nature of a societal
statement of intent.
But where the level of privacy protection can be readily set by free exchanges among individuals
there is no reason for state intervention, and one should instead strive to eliminate constraints
against such transactions.
Those who believe that the market approach to privacy protection is overly generous to business
violators of personal privacy might find themselves pleasantly surprised because the tools of
access control will have shifted the balance of power to individuals and to the protection of
privacy. Indeed, it will be the business users of personal information who will end up objecting
to transactions. They are, of course, worried that while they (together with politicians and
parties) have today relatively free access to individuals or to data about them, a system where
they might have to pay compensation in return for consent might become expensive. They are
correct, but what can they do about it? Access to an individual, even if sanctioned by law, will
require the latter’s cooperation. Right now, individuals do not yet have effective means to make
those desiring personal information compensate them. But the tools to change this, such as
encryption or caller identification, are here or near. Soon, equipment makers and communications
service providers will enable consumers to conveniently sell access. And when this happens,
those marketers who claim to live by the free market will also have to play (and pay) by its
rules. The advent of low-cost technology for manipulating and communicating information has
raised significant concerns about personal privacy. Privacy is a complex issue and can be treated
from many perspectives; this unit provides an overview of some of the economic issues
surrounding privacy.

In particular, we first describe the role of privacy in economic transactions and argue that
consumers will rationally want certain kinds of information about themselves to be available to
producers and want other kinds of information to be secret. We will then consider how one
might define property rights in private information in ways that allow consumers to retain
control over how information about them is used.

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