“Anticipating Personalization"

Abstract: Institutions often personalize using consumers revealed preferences. This paper studies how consumers change their behavior when they anticipate personalization. I use an experiment that allows me to induce the consumer’s information, disclose all consequences of sharing it for personalization, and exogenously manipulate whether personalization is incentive compatible. I find that personalization changes the way people share their information, but not in the way theory predicts; in particular, many share information accurately when they should not. Using a simple task, I can identify the misconceptions that drive suboptimal behavior. Understanding how people respond to anticipated personalization is important for designing it effectively and evaluating consumer welfare..

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