The John M. Olin Center

Paper Abstract

Untitled Document

81. Dan Svirsky, Why Are Privacy Preferences Inconsistent?, 06/2018.

Abstract: People say they value privacy, but they routinely share copious amounts of personal data without much conscious thought. The two most common explanations for this inconsistency are revealed preference (preferences are revealed by actions, not words) and ignorance (people are unaware of their privacy loss). This paper presents an experiment that shows the limits of these explanations. In an online experiment, participants must decide whether to share their Facebook profile data with the survey-taker in exchange for a higher payoff. When directly making a tradeoff between 50 cents and privacy in a Direct Tradeoff treatment, 67% of participants appear to value privacy by refusing to share their Facebook data for 50 cents. By contrast, when participants must “click to reveal” to learn whether privacy is free or costs 50 cents in a Veiled Tradeoff treatment, only 40% of participants appear to value privacy by refusing to share their Facebook data for 50 cents. Consistent with information avoidance driving these differences in apparent valuations of privacy, 56% of participants did not click to reveal to learn which payment option was associated with privacy. The experiment was repeated before, during, and after the Cambridge Analytica Facebook scandal. While privacy valuations in the Direct Tradeoff treatment were unchanged, even at the height of the scandal, the Veiled Tradeoff treatment became much less effective. One month later, the results returned to their pre-scandal values, and the treatment was as effective as before. Taken together, these findings show how individuals' valuations of privacy are sensitive to the elicitation method. Even people who would otherwise pay for privacy seem able to exploit strategic ignorance – keeping their head in the sand – and deal away their data for small amounts of money. The findings suggest reason for skepticism about current federal privacy law, which relies on giving consumers more information about data practices to help them make better choices.