Seminar

Department: Finance

Speaker: Michaela Pagel (Columbia U)

Room: TBD 

Cookies and Shopping

Abstract

This study examines the impact of enhanced data privacy on online shopping

and financial health. Specifically, we analyze the staggered adoption of

cookie permission and compliance systems by US retailers in response to the

European Union’s data protection standards and the California Privacy Act.

We combine information on when specific retailers implemented a cookie compliance

system with individual-level bank and credit card transaction data from

a US data aggregation and analytics provider. We find that online spending

at retailers decreases significantly after they introduce cookie compliance systems.

To address potential selection into who and when individuals shop with

enhanced privacy, we also use exposure to cookie compliance systems based on

pre-policy shopping baskets in a reduced form IV specification. Our IV specification

results confirm the initial findings with respect to spending and show

that individuals incur less overdraft and late fees, rollover less credit card debt,

and borrow less in other high-interest unsecured credit such as payday loans

when they are treated with enhanced privacy. We discuss targeted advertising,

third-degree price discrimination, and shopping convenience as the three main

channels behind these results. Our findings provide insights into the relationship