How Much Is Data Privacy Worth? A Preliminary Investigation

Abstract

Do consumers value data privacy? How much? In a survey of 2,416 Americans, we find that the median consumer is willing to pay just $5 per month to maintain data privacy (along specified dimensions), but would demand $80 to allow access to personal data. This is a “superendowment effect,” much higher than the 1:2 ratio often found between willingness to pay and willingness to accept. In addition, people demand significantly more money to allow access to personal data when primed that such data includes health-related data than when primed that such data includes demographic data. We analyze reasons for these disparities and offer some notations on their implications for theory and practice. A general theme is that because of a lack of information and behavioural biases, both willingness to pay and willingness to accept measures are highly unreliable guides to the welfare effects of retaining or giving up data privacy. Gertrude Stein’s comment about Oakland, California may hold for consumer valuations of data privacy: “There is no there there.” For guidance, policymakers should give little or no attention to either of those conventional measures of economic value, at least when steps are not taken to overcome deficits in information and behavioural biases.

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Notes

  1. 1.

    One participant stated a willingness to pay to prevent access to personal data at $-10, perhaps because he or she expected adverse effects if their personal data were no longer collected by social networking and data brokerage companies. This was also re-assigned a value of zero.

  2. 2.

    It is also important to note that if and to the extent that some social media providers – including Facebook – have monopoly power, they exercise it not by charging users (access is free), but by extracting more data than they would in a competitive market. That issue deserves far more attention.

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Correspondence to A. G. Winegar.

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Appendix

Appendix

Table 1 Summary of responses (unstandardized)
Table 2 Summary of responses (standardized at max = $25,000, min = $0)
Table 3 Demographics (gender, age)
Table 4 Demographics (politics)
Table 5 Demographics (income)
Table 6 WTP linear regression. The omitted categories are women, ages 21 and under who identify politically as democrat and have a household income of $100,000 to $149,999
Table 7 WTA linear regression. The omitted categories are women, ages 21 and under who identify politically as Democrat and have a household income of $100,000 to $149,999
Table 8 Concern about collection of data vs. understanding of what is collected (% of respondents)
Table 9 Summary of ANOVA test (WTA, standardized)

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Winegar, A.G., Sunstein, C.R. How Much Is Data Privacy Worth? A Preliminary Investigation. J Consum Policy 42, 425–440 (2019). https://doi.org/10.1007/s10603-019-09419-y

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Keywords

  • Data privacy
  • Endowment effect
  • Willingness to pay
  • Willingness to accept
  • Behavioural biases