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Direct Marketing: Privacy and Competition


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Direct Marketing: Privacy and Competition

  1. 1. Department of Information and Systems Management School of Business and Management Hong Kong University of Science and Technology Seminar Announcement Direct Marketing: Privacy and Competition by Prof Kai-Lung HUI Assistant Professor, Department of Information Systems National University of Singapore & Prof Ivan PNG Vice Provost for Graduate and Undergraduate Education National University of Singapore 24 October 2003 (Friday) 3:30pm – 5:00pm Conference Room (Room 4379, lift 17-18)  All interested are welcome  Abstract Direct mail, telemarketing, and commercial email are key elements of the promotional mix. This research addresses the trade-off between the benefit to latent consumers (who, absent direct marketing, would not enjoy some product) against the costs of avoidance and intrusion on privacy guardians (who have no interest in the item). We find that guardians’ avoidance and sellers’ investments in collecting information are strategic complements. This implies that measures to deflect direct marketing will increase its cost-effectiveness and lead sellers to spend more. We compare the outcomes under monopoly and duopoly. Both market structures lead to outcomes that are not socially optimal, because sellers ignore the costs to privacy guardians. Competition leads sellers to increase spending on direct marketing and guardians to increase avoidance. The increased marketing raises the benefit to latent consumers, while the increased avoidance raises privacy guardian’s costs. On balance, competition raises welfare if the privacy cost is sufficiently low. Direct marketing can be regulated through taxes based on solicitations or sales. We find that, in the presence of competition, the tax on solicitations is relatively more effective. Biography Prof Kai-Lung Hui ( is an assistant professor in the Department of Information Systems at the National University of Singapore. He received his Ph.D. in Information Systems from the Hong Kong University of Science and Technology. His research interests include copyright of intellectual property, Internet information privacy, branding, and product line design. He has papers published in American Economic Review: Papers and Proceedings, IEEE Transactions on Engineering Management, and Journal of Management Information Systems, among others.
  2. 2. Prof Ivan Png ( is Vice Provost for Graduate and Undergraduate Education at the National University of Singapore (NUS). Concurrently, he is the Kwan Im Thong Hood Cho Temple Professor in the School of Computing and Professor of Business Policy in the School of Business. Previously, Dr Png was with the Anderson School, University of California, Los Angeles (Assistant Professor 1985-90, Associate Professor 1990-95, Professor 1995-96) and the Hong Kong University of Science & Technology (Visiting Reader 1993-95, Visiting Professor 1995-96). He has advised clients including PT Sinar Mas Tunggal, DBS Land, Singapore Telecommunications, and the Hong Kong and China Gas Company.