This blog contains posts and comments written by students in Dr. Tufte's economics classes at Southern Utah University.
3/11/2008
Jacking Our Info
Throughout the day, we generally feel protected from those trying to get information out of us; however, how safe are we? This article touches on companies which collect information from our fingertips. Every time we use the internet, there are companies who track not only the things we buy but also the things we search. The mundane searches and purchases that you make every day are being watched and recorded. The information then is sold to other companies, such as advertising firms, who need to know exactly what the customers’ interests are. This presents a dilemma of whether or not these practices are ethical. Just because we do not notice them recording our information does not deem it acceptable. Economic profits for those collecting information can be huge but under what cost. One needs to decide if the benefit of having custom advertisement directed to you outweighs the cost of being watched.
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Here’s a different twist on the scenario: step out of your “consumer” shoes and imagine you are the company collecting and utilizing this data. The information you collect on current and potential customers can prove to be invaluable in defining and targeting the needs the marketplace. It’s all about market research: analyzing your customer’s purchases and identifying potential sales opportunities based on past behavior.
I agree there are a couple of dilemmas in this situation. Are the information collection practices ethical? Are consumers being taken advantage of despite efforts to maintain privacy? However, a lot of the debate depends on which shoes you are wearing. As a consumer, being the target of a constant onslaught of market research is annoying. As a business-owner, market research is a tool you’d be crazy to leave behind. It comes down to the responsibility of the consumer to make reasonable efforts to protect their personal information and businesses using ethical practices in their research.
Having been on the side of the business that tracks consumer behavior on the internet I am very cautious about every move I make on the internet. If you only what information a business can collect as you surf website. They also do what I call "trolling". There is a person on on the other end watching you bounce around from page to page on their website trying to figure out how they can increase the chances of you making a purchase. Businesses watch your every move and can collect demographic information down to the neighborhood you live in just by visiting their website. They also have analytical tools that can determine your tastes and behaviors based on how you navigate their website. As a business owner this information is incredibly valuable. As a consumer, I'd be very cautious with every move I make on the internet.
As a consumer I think there is some benefit to having personalized advertising. If they can customize their website or their products to me, it may be easier for me to find products that I want. They also learn much more about who their target market is and increase the company's profits. The only problem I have is when different prices are given to different consumers (I don't want to pay more than someone else for the same product).
If a company does have a detailed record of past internet searches and purchases they could take advantage of consumer tastes and preferences. Many retail websites I have used in the past often will show new items similar to my last purchases and searches; however, I don’t think that this new wave of advertising is all bad. It has helped me find great new products. I agree this advertising could create negative externalities like price discrimination because sellers will know how much each consumer is willing to spend, but so far with a little discretion and rational I have found the advertising helpful. Staying rational is the key. One bidder might pay more on e-bay than another, but he or she does not have to keep bidding if they feel the price is too much. The same applies to online shopping. We do not have to buy even when bombarded with custom advertising.
Part of the reason that an article like this stirs such emotion with consumers is the thought that a company’s “Privacy Policy” means that the information the consumer “shares” at a company’s web site (such as clicking on pages, entering shipping info, etc.) is protected and only used by the company for a very limited purpose such as shipping your order. This is not the case with most policies. Think about the last policy you’ve read…maybe think a bit harder…nothing yet? You’re probably like the majority of consumers who just click the accept button and move on without actually reading what you’re consenting to. Next time you log-on to a website, whether it’s a social site, search engine, or online store, read the policy. You’ll be stunned to see what you’re agreeing to.
There are two ManEc topics here.
First, consumer information is used to engage in price discrimination.
Second, there is a strategic game here about whether you divulge information, and whether firms collect it.
I may be cynical here, but I think a lot of what scares people here is the thought of geeks doing this with computers. You divulge far more information far more casually when you talk to a commission salesperson face-to-face on a retail floor. But ... I think a lot of people feel less threatened by them because they are charming and/or they are perceived as not too bright.
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