Privacy Is Precious: On the Attempt to Lift Anonymity on the Internet to Increase Revenue

Abstract

We investigate the effect of a reduction of anonymity on consumers’ purchase decisions (whether to buy, and if so how much to pay) at an online music store with Pay-What-You-Want (PWYW)-like pricing and in an Internet experiment mimicking the real world situation. Revealing the customer’s name, e-mail, and payment to the artist (seller) led to insignificantly higher payments, although it drastically reduced the number of customers purchasing. Overall, the regime led to a revenue loss of 25%. In the online experiment, revenue drops by 35%. These results suggest that the positive effect of reduced anonymity, previously established for donation or public goods contexts, does not extend to a consumption environment. Instead, the substantial opt-out of customers is likely to be motivated by concerns about privacy.

Publication
Journal of Economics & Management Strategy