What Should a Firm Know? Protecting Consumers’ Privacy Rents

Daniel Bird, Zvika Neeman*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review


A monopolistic firm observes a signal about the state of the world and then makes a take-it-or-leave-it offer to an uninformed consumer who has recourse to some outside option. We provide a geometric characterization of the firm’s information structure that maximizes the consumer’s surplus: the optimal regime partitions the space of payoff states into polyhedral cones with disjoint interiors. We interpret our results in terms of the maximization of the consumer’s “privacy rent.” We illustrate and motivate our approach through the example of the regulation of the privacy of medical information in monopolistic health insurance markets.

Original languageEnglish
Pages (from-to)257-295
Number of pages39
JournalAmerican Economic Journal: Microeconomics
Issue number4
StatePublished - 2022


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