Pricing and disseminating customer data with privacy awareness

• We develop a pricing scheme for a data owner to price and disseminate private data.
• A data consumer is provided incentive to reveal his true purpose of data usage.
• Our model departs from the “single crossing” condition in the conventional model.
• Our model uses two decision variables versus only one in the conventional model.
• Our model shows how the price depends on the sensitivity and amount of the data.

Organizations today regularly share their customer data with their partners to gain competitive advantages. They are also often requested or even required by a third party to provide customer data that are deemed sensitive. In these circumstances, organizations are obligated to protect the privacy of the individuals involved while still benefiting from sharing data or meeting the requirement for releasing data. In this study, we analyze the tradeoff between privacy and data utility from the perspective of the data owner. We develop an incentive-compatible mechanism for the data owner to price and disseminate private data. With this mechanism, a data user is motivated to reveal his true purpose of data usage and acquire the data that suits to that purpose. Existing economic studies of information privacy primarily consider the interplay between the data owner and the individuals, focusing on problems that occur in the collection of private data. This study, however, examines the privacy issue facing a data owner organization in the distribution of private data to a third party data user when the real purpose of data usage is unclear and the released data could be misused.