We study a novel privacy concern, i.e., peer disclosure of sensitive personal information in online social communities. We model peer disclosure as the imposition of a negative externality on other people. Our model encompasses the benefits of posting information, positive externalities in the form of recognition and entertainment benefits due to others' sharing of information, and heterogeneous privacy preferences. We find that regulation of peer disclosure is necessary. We consider two candidate regulations, i.e., nudging and quotas. Nudging reduces user participation and privacy harmand sometimes improves social welfare. By contrast, imposing a quota often improves user participation, privacy protection, and social welfare. Adding a nudge on top of a quota does not bring additional benefits. We show that any regulation that uniformly controls the disclosure of sensitive and nonsensitive information will not serve the triple objectives of reducing privacy harm, increasing social welfare, and increasing information contribution. We derive a necessary condition for solutions that can fulfill these three objectives. We also compare the incentives of the platformowner and social planner and drawrelated managerial and policy implications.

Additional Metadata
Keywords Nudging, Online social communities, Peer disclosure, Privacy, Quotas, Regulation
Persistent URL dx.doi.org/10.1287/isre.2017.0744, hdl.handle.net/1765/112104
Journal Information Systems Research
Cao, Z. (Zike), Hui, K.-L. (Kai-Lung), & Xu, H. (Hong). (2018). An economic analysis of peer disclosure in online social communities. Information Systems Research, 29(3), 546–566. doi:10.1287/isre.2017.0744