Taking Marketing Seriously: A Law and Economics Analysis of Personalized Marketing in the Digital Age

Abstract

Imagine every ad, every price, and even every contract completely tailored to you personally — welcome to the age of AI-driven hyper-personalization.

Today, vast amounts of consumer data can be collected and processed, creating consumer profiles that are individualized with ever-increasing precision. This has paved the way for one-to-one interactions that can be adjusted in real-time and lead to unparalleled behavior modification. Personalized marketing promises to respond more accurately to consumer needs and preferences, elevating the effectiveness of marketing communications to new heights. However, this seemingly customized digital world is accompanied by serious concerns about the alarming potential of personalized marketing to exploit consumers' cognitive biases, heuristics, and vulnerabilities. The power of hyper-personalization to subtly bend consumer behavior to the will of companies and give marketers unprecedented control raises the question of the extent to which this could lead to a significant deterioration of consumer’s position in the market.

This dissertation analyzes personalized marketing from a law and economics perspective to expose and contrast its promises and perils. In doing so, it examines the extent to which personalized marketing is regulated by the EU legal framework. The research shows that current European consumer policy can only partially protect consumers. A four-part policy approach is therefore proposed to adequately address personalized marketing and safeguard consumer autonomy, equity, and welfare.

Regulating personalized marketing is a complex task characterized by a clear trade-off between efficiency and fairness. How much freedom do you give up in exchange for a hyper-personalized experience? How confident are you that the price you pay will not exceed what others pay for the exact same service? And what does it mean for your autonomy when an algorithm predicts your behavior better than you do yourself? This dissertation seeks to provide a starting point for further regulation and ultimately contribute to better consumer protection in the digital age.