Privacy Can Arise Endogenously in an Economic System with Learning Agents
<|reference_start|>Privacy Can Arise Endogenously in an Economic System with Learning Agents: We study price-discrimination games between buyers and a seller where privacy arises endogenously--that is, utility maximization yields equilibrium strategies where privacy occurs naturally. In this game, buyers with a high valuation for a good have an incentive to keep their valuation private, lest the seller charge them a higher price. This yields an equilibrium where some buyers will send a signal that misrepresents their type with some probability; we refer to this as buyer-induced privacy. When the seller is able to publicly commit to providing a certain privacy level, we find that their equilibrium response is to commit to ignore buyers' signals with some positive probability; we refer to this as seller-induced privacy. We then turn our attention to a repeated interaction setting where the game parameters are unknown and the seller cannot credibly commit to a level of seller-induced privacy. In this setting, players must learn strategies based on information revealed in past rounds. We find that, even without commitment ability, seller-induced privacy arises as a result of reputation building. We characterize the resulting seller-induced privacy and seller's utility under no-regret and no-policy-regret learning algorithms and verify these results through simulations.<|reference_end|>
@article{ananthakrishnan2024privacy,
    title={Privacy Can Arise Endogenously in an Economic System with Learning
  Agents},
    author={Nivasini Ananthakrishnan, Tiffany Ding, Mariel Werner, Sai Praneeth
  Karimireddy, Michael I. Jordan},
    journal={arXiv preprint arXiv:2404.10767},
    year={2024},
    archivePrefix={arXiv},
    eprint={2404.10767},
    primaryClass={cs.GT}
}