|M.Sc Student||Danino Gal|
|Subject||Privacy Protection and Welfare in Online Advertising|
|Department||Department of Industrial Engineering and Management||Supervisors||Professor Itai Arieli|
|Professor Rann Smorodinsky|
|Full Thesis text|
Online advertising is the fuel behind a plethora of consumer services users enjoy on a daily basis. The technological disruption of the advertising business due to the web and the digital tracking of consumers is primarily about targeted advertising which means that ads can be made much more relevant to the consumers, and the on-line advertising market becomes quite efficient. The primary players in this business are the web publishers, the advertisers, and the aforementioned consumers. The publishers own `real-estate' on websites and would like to sell this real-estate for the highest price to an advertiser. Each time a consumer visits the website a new selling opportunity occurs. Most publishers collect information about the consumers that visit their website (e.g. via registration information or through cookie technology) and strategically share this information with the advertisers who, in turn, account for this information when bidding for the real-estate. In recent years much concern has been raised in the public debate about user privacy, which is clearly jeopardized in the above setting as publishers share consumer information with advertisers. One argument made against possible privacy protection regulation is that, with less information sharing, consumers will more likely receive less relevant ads, thus reducing overall market efficiency. In this work we examine the tension between privacy regulation and efficiency in such a market by examining a monopolistic publisher who sells its real estate via a standard second price auction. We focus on a game where advertisers have a binary preference towards advertising to each type of consumer, and present necessary and sufficient conditions for which there exists a privacy protection regulation that not only does not reduce welfare, but rather strictly increases it.