Abstract:
We study how privacy regulations impact information transmission. A receiver faces a decision whose payoff depends on an unknown state. A platform sends a message to her given a sensitive and a nonsensitive signal. Privacy loss occurs when the receiver updates about the former. When privacy is sufficiently important, regulations that either prohibit conditioning on the sensitive signal or only allow conditioning on the sufficient statistic given both signals preclude information transmission. Alternatively, when the platform must solicit the sensitive signal from a privacy-concerned sender, the optimal policy automatically satisfies one or the other above regulation, depending on the parameter.
