An Empirical Approach to Understanding Privacy Valuation

As privacy becomes more central to information policy debates, conceptual privacy frameworks have increasingly used economic models. However, our understanding of the motivating factors behind informational privacy behavior is far from complete. This paper uses an economic behavior experiment to assess consumer privacy sentiments in controlled conditions to better understand the tradeoffs between privacy and economic benefits. In particular, we find that consumers consider the type of personal information, and how that data will be used, rather than a broader aversion to all information collection. We also find some evidence supporting a “privacy externality” where consumers rationally oppose a data collection scheme that does not directly impact them or make use of their data, and that opting-out allows a more realistic expression of privacy preferences.