  We analyze the value to e-commerce website operators of offering privacy
options to users, e.g., of allowing users to opt out of ad targeting. In
particular, we assume that site operators have some control over the cost that
a privacy option imposes on users and ask when it is to their advantage to make
such costs low. We consider both the case of a single site and the case of
multiple sites that compete both for users who value privacy highly and for
users who value it less. One of our main results in the case of a single site
is that, under normally distributed utilities, if a privacy-sensitive user is
worth at least $\sqrt{2} - 1$ times as much to advertisers as a
privacy-insensitive user, the site operator should strive to make the cost of a
privacy option as low as possible. In the case of multiple sites, we show how a
Prisoner's-Dilemma situation can arise: In the equilibrium in which both sites
are obliged to offer a privacy option at minimal cost, both sites obtain lower
revenue than they would if they colluded and neither offered a privacy option.
