Privacy and customer segmentation in the smart grid

In the electricity grid, networked sensors which record and transmit increasingly high-granularity data are being deployed. In such a setting, privacy concerns are a natural consideration. In order to obtain the consumer´s valuation of privacy, we design a screening mechanism consisting of a menu of contracts offered to the energy consumer with varying guarantees of privacy. The screening process is a means to segment customers. Finally, we design insurance contracts using the probability of a privacy breach to be offered by third-party insurance companies.