Ethical Management of Consumer Information: Solving the Problem of Information Externality Using the Coasian Approach

Abstract

Society has focused on privacy solutions to problems related to consumer information, yet the problem has not gone away. Why is this? One answer is that privacy, a regulatory correction, does not fix the underlying “information externality” problem. This chapter integrates economic, ethical, and legal theories related to the issue of information management in an attempt to clarify the debate surrounding the issue of consumer information. It first explains why the debate exists by describing the basic characteristics of information. It then integrates an economic discussion of externalities with the ethical issues inherent in the problem of consumer information to suggest alternative ways to correct externalities. This chapter suggests that one way to correct the information externality is to use a Coasian approach. We apply that approach to the case study of DoubleClick, an Internet advertiser criticized for its potential yet never implemented ability to act unethically with consumer information.