Electronic Markets for Private Information: Economic and Security Considerations

Technological advances in the collection, storage and analysis of data have increased the ease with which businesses can make profitable use of information about individuals. Some of this information is private and individuals are simultaneously becoming more aware of its value and concerned about losing control of it. As a partial solution to these concerns a model is presented that serves two purposes. The first is to enable the use of private data in the answering of queries while simultaneously protecting the owners of the data from loss of privacy. The second is to develop a compensation model for the use of the data that allows individuals to dynamically redefine their security requirements. This compensation model is built on a model for information security and forms the foundation of a market for private information. Several information security techniques and their suitability for inclusion in the compensation model are discussed. Compensation models like the one presented here could be used in a self-regulating market for private information. Finally, the compensation component of an intermediated market for private information is developed and extensively analyzed. We provide insights and draw several important conclusions on markets for private information.