RFID in the Retail Sector

A Methodology for Analysis of Policy Proposals and Their Implications for Privacy, Economic Efficiency and Security

by Gordon Bitko

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Radio Frequency Identification (RFID) is a low cost and potentially covert method of remotely retrieving stored information. Broad recent growth of RFID applications, especially in the retail sector, has raised several specific privacy and data protection concerns derived from the potential that RFID offers for surreptitious monitoring and the linking of personal and obscure or private information into large databases. The result of these concerns has been an active policy debate, with legislative proposals at the U.S. state and federal levels, as well as in Europe. The author first constructs a qualitative framework for analyzing these policies, which provides a description of the key stakeholders in the debate and the issues concerning each. He then develops a simple economic model showing that all the assessed policies involve substantial tradeoffs in firms’ and individual behaviors and that a true understanding of uncertainties such as market structure and individual preferences about privacy is critical in assessing the impact of any policy.

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This document was submitted as a dissertation in October 2006 in partial fulfillment of the requirements of the doctoral degree in public policy analysis at the Pardee RAND Graduate School. The faculty committee that supervised and approved the dissertation consisted of Bob Anderson (Chair), Tora Bikson, and Jim Dertouzos.

This report is part of the RAND Corporation dissertation series. Pardee RAND dissertations are produced by graduate fellows of the Pardee RAND Graduate School, the world's leading producer of Ph.D.'s in policy analysis. The dissertations are supervised, reviewed, and approved by a Pardee RAND faculty committee overseeing each dissertation.

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