A Theory of Pricing Private Data

Personal data has value to both its owner and to institutions who would like to analyze it. Privacy mechanisms protect the owner's data while releasing to analysts noisy versions of aggregate query results. But such strict protections of individual's data have not yet found wide use in practice. Instead, Internet companies, for example, commonly provide free services in return for valuable sensitive information from users, which they exploit and sometimes sell to third parties. As the awareness of the value of the personal data increases, so has the drive to compensate the end user for her private information. The idea of monetizing private data can improve over the narrower view of hiding private data, since it empowers individuals to control their data through financial means. In this paper we propose a theoretical framework for assigning prices to noisy query answers, as a function of their accuracy, and for dividing the price amongst data owners who deserve compensation for their loss of privacy. Our framework adopts and extends key principles from both differential privacy and query pricing in data markets. We identify essential properties of the price function and micro-payments, and characterize valid solutions.Comment: 25 pages, 2 figures. Best Paper Award, to appear in the 16th International Conference on Database Theory (ICDT), 201

The Monetary Origins of Asymmetric Information in International Equity Markets

Existing studies using low-frequency data show that macroeconomic shocks contribute little to international stock market covariation. Those studies, however, do not account for the presence of asymmetric information, where sophisticated investors generate private information about the fundamentals that drive returns in many countries. In this paper, the authors use a new microstructure data set to better identify the effects of private and public information shocks about U.S. interest rates and equity returns. High-frequency private and public information shocks help forecast domestic money and equity returns over daily and weekly intervals. In addition, these shocks are components of factors that are priced in a model of the cross-section of international returns. Linking private information to U.S. macroeconomic factors is useful for many domestic and international asset-pricing tests.Financial markets; International topics; Market structure and pricing

Consolidated Markets, Brand Competition, and Orange Juice Prices

This paper examines how consolidation in the marketing system affects prices for orange juice. We isolated the pricing behavior of brand marketers, wholesalers, and retailers by observing the retail prices for specific orange juice products, including leading national brands and private label brands, in 54 U.S. markets over a 1-year period. The data provided little compelling evidence that consolidated markets engaged in non-competitive pricing behavior. Increased brand competition, particularly between private labels and leading national brands, did, however, appear to lower average market prices.consumer demographics, national brands, orange juice, price behavior, private labels, wholesaler concentration, retailer concentration, Demand and Price Analysis, Industrial Organization,

Asymmetric information and imperfect competition in the loan market

We measure the consequences of asymmetric information in the Italian market for small business lines of credit. Exploiting detailed, proprietary data on a random sample of Italian firms, the population of medium and large Italian banks, individual lines of credit between them, and subsequent individual defaults, we estimate models of demand for credit, loan pricing, loan use, and firm default based on the seminal work of Stiglitz and Weiss (1981) to measure the extent and consequences of asymmetric information in this market. While our data include a measure of observable credit risk comparable to that available to a bank during the application process, we allow firms to have private information about the underlying riskiness of their project. This riskiness influences banks’ pricing of loans as higher interest rates attract a riskier pool of borrowers, increasing aggregate default probabilities. Data on default, loan size, demand, and pricing separately identify the distribution of private riskiness from heterogeneous firm disutility from paying interest. Preliminary results suggest evidence of asymmetric information, separately identifying adverse selection and moral hazard. We use our results to quantify the impact of asymmetric information on pricing and welfare, and the role imperfect competition plays in mediating these effects

Assessing the Competitive Interaction Between Private Labels and National Brands

In contrast to single-equation cross-sectional studies of private label share, developing a complete understanding of the nature of the competitive interaction between national brands and private labels requires an understanding of the determinants of both demand and strategic pricing decisions by firms. Consequently, we estimate a simultaneous system of share and price for private labels and national brands. From the empirical results, two measures of market response are derived. The unilateral demand elasticity measures the pure own demand response, while the residual (or total) elasticity also captures the impact of competitive price reaction (Baker and Bresnahan 1985). When taken together, these provide important strategic insights into the pricing interaction between national brands and private labels. In our empirical analysis, we employ a flexible, non-linear demand specification, the Linear Approximate Almost Ideal Demand System (LA/AIDS, Deaton and Muellbauer 1980a), and specify the price reaction equations derived under the LA/AIDS demand specification. Incorporating LA/AIDS demands into a structural equation framework represents an important departure from previous demand specifications in competitive analysis. Using the proposed LA/AIDS framework, we perform a detailed intra-category analysis using data on six individual categories: bread, milk, pasta, instant coffee, butter and margarine. In addition, in an attempt to generalize the results to a broader set of categories and in order to enable us to compare our results to previous cross-section studies, we also estimate using a sample pooled across 125 categories and 59 geographic markets. Consistent with our objectives, we find that consumer response to price and promotion decisions (demand) and the factors influencing firm pricing behavior (supply) jointly determine observed market prices and market shares. Further, estimates of residual demand elasticities suggest that examination of partial demand elasticities alone may provide an incomplete picture of the ability of brands to raise price. Managerial implications, limitations and suggestion for future research are discussed.competition, competitive strategy, private labels, pricing, Demand and Price Analysis,

The typology of partial credit guarantee funds around the world

This paper presents data on 76 partial credit guarantee schemes across 46 developed and developing countries. Based on theory, the authors discuss different organizational features of credit guarantee schemes and their variation across countries. They focus on the respective role of government and the private sector and different pricing and risk reduction tools and how they are correlated across countries. The findings show that government has an important role to play in funding and management, but less so in risk assessment and recovery. There is a surprisingly low use of risk-based pricing and limited use of risk management mechanisms.

Pricing and supplier concentration in the private client segment of the audit market : market power or competition ?.

This study differs from prior audit pricing-studies as 1) it focuses on the issue of price competition in the (small) private client segment of the audit market, and 2) addresses the question whether and how the audit-pricing model changed in that market between 1989-1997. Given the significant increases in market concentration and two big audit-firm mergers in that period, we try to assess whether price competition (market power) has increased (decreased) or decreased (increased). We use Belgian data on privately owned companies from 1989 and 1997 for our analyses. We find that audit fees are significantly associated with the incumbent auditor's market share both in 1989 and 1997. Our results are in line with prior studies on public client samples and hence do not support prior assumptions (see, for example, Simunic 1980) that there are no price premia charged by large auditors in the small-client segment of the audit market. It is however not clear whether the reported price premium is due to market power or differentiated audit quality. As to the evolution of audit pricing in the private client segment of the Belgian audit market between 1989 and 1997, we find that the impact of various audit-fee determinants changed significantly and report evidence supportive of increased price competition.Management; Companies; Pricing; Competition;

Confirming the Price Effects of Private Labels Development

We study the price response of national brands to the development of private labels. We use monthly data from a consumer survey reporting their purchases for 218 food products. We show that when private labels have a significant effect on national brands prices (144 cases over 218), that is positive (89%). We also show that the increase in the prices of national brand products is explained by a strategy of product differentiation. Finally, price reaction of national brands differs with the type of private labels they are facing. This paper confirms, on a larger number of products, previous empirical results.private labels, pricing, empirical models, food products, L81, Q13, D40, Demand and Price Analysis,

Pricing Decisions in Educational Institutions: An Activity based Approach

AbstractThe number of private high schools is significantly growing due to recent increase in the demand for private schools. Therefore, it has been crucial for the administration of private schools to be able to gain competitive advantage and to make strategic decisions including pricing decisions. Private schools have to determine appropriate annual fees in an intensely competitive environment in order to attract new students or not to lose current students. Many factors such as customer demand, attitudes of competing educational institutions, public image of the school, political environment, legal regulations, country's economic conditions and other factors are effective in pricing decisions. An educational institution determines the education fee using either market based or cost based approaches. In this study we will focus on cost-plus pricing approach. A private school may determine the fee by adding a sufficient profit margin on the cost of resources consumed to provide educational services in cost plus pricing approach. Therefore in this approach accurately calculating the cost of services is significantly important. Activity based costing (ABC) method is a new approach in allocating indirect costs to cost objects and determining the unit costs by producing the most accurate data needed by the administrators and as an alternative to traditional costing methods. In this study we will implement the activity based costing method in a private school and determine the annual fees using activity based approach. In the study, we provide application of strategic pricing decisions in an example of a Turkish private high school