February 12, 2005

I am not a number!

Economist Alex Tabarok points out that by losing our privacy increases efficiency in economic transactions, while linking to this satirical movie.
I don't have a Nobel Prize in economics, but it is obvious to me that revealing too much information hurts one's position in negotiations. Under "negotiations" I include merchants decreasing or increasing prices and customers buying or not.

  • For instance, in the movie, the customer is charged extra for pepperoni pizza because he has high cholesterol.
  • Another example is hugely overpriced Stop & Shop supermarket chain where customers save by giving away their shopping habits - information that allows Stop & Shop to jack up the prices to maximize the profit.
  • Yet another example is walking to a car dealership and giving away your income and amount of money in savings, so that the dealer can offer you the highest price you can afford.
  • Need-based financial aid: schools evaluating an applicant's income and replying: "Great news. We have evaluated your financial situation and have determined that if we take more than $1,000 out of you, you'll be reduced to the homeless shelter. So we're awarding you $999,000 in financial aid and you only have to give us $1,000 to fly from Boston to San Francisco." (from the same article)

Posted by laza at February 12, 2005 01:10 AM | TrackBack
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