Thursday, July 31, 2008

Prisoner’s Dilemma in Web Data Mining and Direct Marketing

Morse and Morse have recommended a virtue theory framework to govern the impact Internet data mining and direct marketing have on privacy. They argue that corporate financial interests must be moderated by obligations to the society that gives the corporations their existence.

Their solution is for business to be temperate, a key virtue factor in their proposed framework. Temperate behavior for Internet data mining and direct marketing involves a balance between the two roles inherent in the new business empowering technologies. These technologies act as both social agents and as economic agents (Morse and Morse, 2002, p 93).

In a standard MBA text on ethics, Business Ethics, DeGeorge (2005, pp 498-500) reinforces the Morse and Morse argument for temporance with the observation that the assumption of anonymity is not valid with the Internet yet it is the intuitive expectation of consumers based on their brick and mortar experience.

Additionally, like them DeGeorge advocates informed consent as a primary prerequisite for Internet marketing activity in general, and this of course includes data tracking and data mining in particular. Both DeGeorge, and Morse and Morse conclude that privacy risks on the Internet are serious enough to have precedence over economic benefits.

I believe that the Prisoner’s Dilemma Model can provide a complimentary perspective to clarify aspects of this argument. Data mining and its resultant direct marketing have created a Prisoner’s Dilemma between corporate marketing and individual’s who surf the Web.

Game Theory has been integrated into economics and allows for the expression of social goods in equilibrium analysis. Velasquez (1992, p 321), gives a good definition of one model in Game Theory, the Prisoner’s Dilemma, which is a relationship between at least two parties where each party is faced with two choices.

They can cooperate with the interests of the other party(s) or they can compete with the interests of the other party(s). The payoff is no gain if everyone competes with each other, a stalemate. If all parties cooperate with each other there is a moderate but steady gain. If one party chooses to cooperate but the other party chooses to compete instead, the competitor makes a substantial gain.

This seems to be the state of Internet tracking and data mining today. Consumers are implicitly cooperating with Internet data mining companies. These companies on the other hand are choosing to compete and risking the cooperator’s privacy for the sake of greater, one-sided financial reward.

According to Cooter (see Berkley), repetitive transactions with informed consent are less likely to result in competitive behavior. Instead, they will have the more efficient long-term solution of both parties cooperating. I believe that here is where informed consent will change the nature of the tracking and data mining activities on the Internet.

As this relationship matures, consumers will become more aware of the risks data mining is taking at their expense. Tracking and data mining are repetitive transactions, with a potential benefit and risk. The benefit is an economic good while the risk is a social good. When both sides are aware of what is taking place, the cooperative option of modest but mutual gain is favored in the Prisoner’s Dilemma model. The temperance suggested by Morse and Morse is the favored outcome that grows out of full disclosure.


De George, Richard (2005). Business Ethics. Pearson/Prentice-Hall.

Morse, John and Suzanne Morse (2002). Teaching Temperance to the “Cookie Monster”: Ethical Challenges to Data Mining and Direct Marketing. Business and Society Review, Vol. 107, No. 1, pp. 76-97, Spring 2002

Velasquez, Manuel (January 1992). International Business Morality and the Common Good. Business Ethics Quarterly. Retrieved from Taking Sides, 9th Edition. Newton, Lisa and Maureen Ford Editors. McGraw-Hill

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