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Privacy and Marketing Externalities: Evidence from Do Not Call

Authors Goh, Khimyong
Hui, Kai Lung View this author's profile
Png, Ivan P.L.
Issue Date 2015
Source Management Science , v. 61, (12), December 2015, p. 2982-3000
Summary If not well targeted, advertising and direct marketing inflict nuisance and inconvenience on consumers. Theoretical analyses predict that consumer actions to avoid advertising impose externalities on other consumers. We investigate the extent of such externalities in the context of the U.S. Do Not Call (DNC) registry by exploiting the exogenous timing of the enforcement of the registry. Supported by multiple robustness tests, and validation and falsification exercises, we conclude that consumer DNC registrations imposed externalities on other consumers. An increase in the first wave of registrations by 1% was associated with a 3.1% increase in subsequent registrations. This effect was stronger in larger and more educationally or racially heterogeneous markets. The externality was possibly due to unregistered consumers being more receptive to telemarketing and telemarketers increasing calls to them. Our results suggest that managers should facilitate consumer opt-out, especially in larger and more educationally or racially heterogeneous markets.
ISSN 0025-1909
Language English
Format Article
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