Pricing Anonymity

Daniel G. Arce, Rainer Böhme

Abstract: In electronic anonymity markets a taker seeks a specified number of market makers in order to anonymize a transaction or activity. This process requires both coalition formation, in order to create an anonymity set among the taker and makers, and the derivation of the fee that the taker pays each maker. The process has a novel property in that the taker pays for anonymity but anonymity is created for both the taker and the makers. Using the Shapley value for nontransferable utility cooperative games, we characterize the formation of the anonymity set and the fee for any arbitrary number of makers selected by the taker.