Quantifying privacy choices with experimental economics

2019

Data is key for the digital economy, underpinning business models and service provision, and a lot of these valuable datasets are personal in nature. Information about individual behaviour is collected regularly by organisations. This information has value to businesses, the government and third parties. It is not clear what value this personal data has to consumers themselves. Much of the digital economy is predicated on people sharing personal data, however if individuals value their privacy, they may choose to withhold this data unless the perceived benefits of sharing outweigh the perceived value of keeping the data private. Further, they might be willing to pay for an otherwise free service if paying allowed them to avoid sharing personal data. We used five evaluation techniques to study preferences for protecting personal data online and found that consumers assign a positive value to keeping a variety of types of personal data private. We show that participants are prepared t...

PLOS ONE, 2023

Information about individual behaviour is collected regularly by organisations. This information has value to businesses, the government and third parties. It is not clear what value this personal data has to consumers themselves. Much of the modern economy is predicated on people sharing personal data, however if individuals value their privacy, they may choose to withhold this data unless the perceived benefits of sharing outweigh the perceived value of keeping the data private. One technique to assess how much individuals value their privacy is to ask them whether they might be willing to pay for an otherwise free service if paying allowed them to avoid sharing personal data. Our research extends previous work on factors affecting individuals' decisions about whether to share personal data. We take an experimental approach and focus on whether consumers place a positive value on protecting their data by examining their willingness to share personal data in a variety of data sharing environments. Using five evaluation techniques, we systematically investigate whether members of the public value keeping their personal data private. We show that the extent to which participants value protecting their information differs by data type, suggesting there is no simple function to assign a value for individual privacy. The majority of participants displayed remarkable consistency in their rankings of the importance of different types of data through a variety of elicitation procedures, a finding consistent with the existence of stable individual privacy preferences in protecting personal data. We discuss our findings in the context of research on the value of privacy and privacy preferences.

IEEE Security & Privacy, 2017

Kyklos, 2014

Journal of the Academy of Marketing Science, 2002

The World Wide Web has significantly reduced the costs of obtaining information about individuals, resulting in a widespread perception by consumers that their privacy is being eroded. The conventional wisdom among the technological cognoscenti seems to be that privacy will continue to erode, until it essentially disappears. The authors use a simple economic model to explore this conventional wisdom, under the assumption that there is no government intervention and privacy is left to free-market forces. They find support for the assertion that, under those conditions, the amount of privacy will decline over time and that privacy will be increasingly expensive to maintain. The authors conclude that a market for privacy will emerge, enabling customers to purchase a certain degree of privacy, no matter how easy it becomes for companies to obtain information, but the overall amount of privacy and privacy-based customer utility will continue to erode. The advance of civilization is nothing but an exercise in the limiting of privacy.-Isaac Asimov Civilization is the progress toward a society of privacy.-Ayn Rand Science fiction writer Isaac Asimov and political novelist Ayn Rand take opposite sides with respect to the eventual outcome with respect to privacy. It is clearly the case,

Management Information Systems Quarterly

This paper reports the results of an exploratory field experiment in Singapore that assessed the values of two types of privacy assurance -privacy statements and privacy seals. We collaborated with a local firm to host the experiment on its website with its real domain name, and the subjects were not informed of the experiment. Hence, it provided a field observation of the subjects' behavioral responses toward the privacy assurances. We found that: (1) the existence of a privacy statement induced more subjects to disclose their personal information but that of a privacy seal did not; (2) monetary incentive had a positive influence on disclosure; and

The Economics of Privacy, 2024

By several accounts, the economics of privacy has grown into a remarkably successful field of research. As the means of collecting and using individuals’ data have expanded, so has the body of work investigating trade-offs associated with those data flows. The number of scholars working in the area has grown, much like the breadth of topics investigated. References to the economic value of personal data have become common in policy and regulation, and so have mentions of economic dimensions of privacy problems. Thinly veiled underneath those successes, however, lies a less encouraging trend. In this manuscript, I argue that the very success of the economics of privacy has laid the foundation for a potentially adverse effect on the public debate around privacy. Economic arguments have become central to the debate around privacy. When used as complements to considerations less amenable to economic quantification, those arguments are valuable tools: they capture a portion of the multiform implications of evolving privacy boundaries. When, instead, economic arguments crowd out those other noneconomic considerations from the public discourse around privacy, problematic scenarios arise. In one scenario, the economic analysis of privacy will keep growing in influence, but its overly narrow conception of privacy will impoverish rather than augment the depth of the debate around privacy. In a second scenario, less likely but equally problematic, the economics of privacy will progressively undermine its own relevance by failing to account for the complexity and nuance of modern privacy problems. There is a third scenario—one this manuscript explores. The economics of privacy may expand its horizons and relevance both by considering economic dimensions and research questions that have so far received limited attention, and by accounting for the broader scholarship on privacy coming from other disciplines. As a complement to the contributions of other fields, rather than a substitute for them, the economics of privacy may keep thriving and remain a useful tool for debate and policymaking.

IEEE Security and Privacy Magazine, 2005

In several experimental auctions, participants put a dollar value on private information before revealing it to a group. An analysis of results show that a trait's desirability in relation to the group played a key role in the amount people demanded to publicize private information. Because people can easily obtain, aggregate, and disperse personal data electronically, privacy is a central

Economics & Sociology

Protection of privacy in the information age is a growing challenge. Corporations and other institutions collect data and utilize them for various purposes, not all of which may be in favour of individuals. Yet still little is known of how individuals perceive the value of privacy and what is the individuals' awareness of costs and benefits associated with data sharing. This article presents the experimental research on factors determining privacy behavior of consumers. We provide evidence, that the need of privacy protection depends on gender and is affected by priming. On the other hand, nor the type of purchased good nor the decision-making method had the significant impact in our study on willingness to disclose private data.

2002

This paper seeks to address the sharp increase in public debate about privacy issues, particularly on the issues of Internet privacy and the value of personal information. The research questions we are addressing here are -How should an Internet Service Provider (ISP) price its service given that the consumers vary in their valuation for privacy and also vary in terms of the value of their personal information to a third party? Should the ISP have a blanket policy of never collecting, or a policy of always collecting and revealing information? We calculate the separating and pooling strategies for the ISP under asymmetric information and compare them with the full information benchmarks. We find that in some cases the ISP may be no worse off than in the full information case while in other cases it may have to restrict the set of contracts so that they are incentive compatible and individually rational.

2009

This paper shows that privacy concerns in commercial contexts are not solely driven by a desire to control the transmission of personal information or to avoid intrusive direct marketing campaigns. When they express privacy concerns, consumers anticipate indirect economic consequences of data use, such as price discrimination. Our general hypothesis is that consumers are capable of expressing differentiated levels of concerns in the presence of changes that suggest indirect consequences of information transmission. We suggest that there is a homo economicus behind privacy concerns, not simply a primal fear. This hypothesis is tested in a large-scale experiment evoking the context of affinitybased direct marketing of insurances, which relies on data transmitted by alumni associations. Because opt-in and opt-out choices offered by firms to consumers usually capture non-situational preferences about data transmission, their ability to enact privacy concerns is questioned by our findings.

In many types of information systems, users face an implicit tradeoff between disclosing personal information and receiving benefits, such as discounts by an electronic commerce service that requires users to divulge some personal information. While these benefits are relatively measurable, the value of privacy involved in disclosing the information is much less tangible, making it hard to design and evaluate information systems that manage personal information. Meanwhile, existing methods to assess and measure the value of privacy, such as self-reported questionnaires, are notoriously unrelated of real eworld behavior. To overcome this obstacle, we propose a methodology called VOPE (Value of Privacy Estimator), which relies on behavioral economics' Prospect Theory (Kahneman & Tversky, 1979) and valuates people's privacy preferences in information disclosure scenarios. VOPE is based on an iterative and responsive methodology in which users take or leave a transaction that includes a component of information disclosure. To evaluate the method, we conduct an empirical experiment (n ¼ 195), estimating people's privacy valuations in electronic commerce transactions. We report on the convergence of estimations and validate our results by comparing the values to theoretical projections of existing results (Tsai, Egelman, Cranor, & Acquisti, 2011), and to another independent experiment that required participants to rank the sensitivity of information disclosure transactions. Finally, we discuss how information systems designers and regulators can use VOPE to create and to oversee systems that balance privacy and utility.

American Economic Review

Statistical agencies face a dual mandate to publish accurate statistics while protecting respondent privacy. Increasing privacy protection requires decreased accuracy. Recognizing this as a resource allocation problem, we propose an economic solution: operate where the marginal cost of increasing privacy equals the marginal benefit. Our model of production, from computer science, assumes data are published using an efficient differentially private algorithm. Optimal choice weighs the demand for accurate statistics against the demand for privacy. Examples from US statistical programs show how our framework can guide decision-making. Further progress requires a better understanding of willingness-to-pay for privacy and statistical accuracy. (JEL C38, C81, D83)

2004

In this paper we create an experimental 'information market' where consumers can trade in potentially useful personal information. We study how a market where trade in information takes place compares experimentally with a market where there is no trade in information. We test the impact of trading in information and the impact of stricter privacy laws on consumers and sellers, and also the impact from a social perspective. Total surplus was found to be significantly higher in a higher privacy regime than in a lower privacy regime. Although our theoretical predictions showed that sellers would be better off in a higher privacy regime, the results from the experiment did not support it significantly. Consumers were found to be better off in the higher privacy regime although, the theoretical results made no such predictions. There was partial support for the efficiency being higher in a higher privacy regime.

El Profesional de la Información

(UNED), holds a Ph.D. and A MSC in Economic and Business Sciences from UNED, a MSc in Telecommunication Engineering from the Universidad Politécnica of Madrid, and also holds a MA in Law from the Universidad Complutense de Madrid (UCM). He works in economics and the regulation of the convergent sector of information and communication technologies, and in factors that influence the development of the information society. He is the lead investigator of the project "Understanding personal information-driven markets", financed by the Ministerio de Economía y Competitividad through the National program of research, development and innovation oriented toward societal challenges (ECO2013-47055-R), of which this article is a result.