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The Digital Privacy Paradox: Small Money, Small Costs, Small Talk

Sep 2017
Working Paper
17-032
By  Susan Athey, Christian Catalini, Catherine Tucker

'Notice and Choice' has been a mainstay of policies designed to safeguard consumer privacy. This paper investigates distortions in consumer behavior when faced with notice and choice which may limit the ability of consumers to safeguard their privacy using data that is derived from a eld experiment at MIT which distributed a new digital currency, Bitcoin, to all undergraduates. There are three ndings. First, the effect small incentives have on disclosure may explain the privacy paradox: People say they care about privacy, but they are willing to relinquish private data quite easily when incentivized to do so. Second, small navigation costs have a tangible effect on how privacy-protective consumers' choices are, often in sharp contrast with individual stated preferences about privacy. Third, the introduction of irrelevant, but reassuring information about privacy protection makes consumers less likely to avoid surveillance, regardless of their stated preferences towards privacy.