The Value of Privacy: Keeping the Money Where the Mouth is

Despite the high value that internet users place on privacy, they offer their personal information for low compensations. This behavior, known as the privacy paradox, has been explained by a stream of literature with different behavioral biases, and in particular with hyperbolic discounting. However, economics offers two possible reasons to discount payoffs—costs of waiting and hazard rates—which produce two possible reasons for choice reversal. The paper shows that the second can explain the privacy paradox within a rational-choice framework in a way that fits more intuitively with consumer claims and with contemporary policy debates on privacy. This account would change the policy conclusions of the hyperbolic discounting model and would account for current trends in data protection law. In particular, it would be relevant for the right to be forgotten. JEL Classification: K39; K11; D81; D18