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Abstract

I empirically separate two components in a consumer’s privacy preference. The intrinsic component is a “taste” for privacy, a utility primitive. The instrumental component comes from the consumer’s anticipated economic loss from revealing his private information to the firm, and arises endogenously from a firm’s usage of consumer data. Combining an experiment and a structural model, I measure the revealed preferences separately for each component. Intrinsic preferences have seemingly small mean values, ranging from 0.14 to 2.37 dollars per demographic variable. Meanwhile, they are highly heterogeneous across consumers and categories of data: The valuations of consumers at the right tail often exceed the firm’s valuation of individual consumer data. Consumers’ self-selection into data sharing depends on the respective magnitudes and correlation between the two preference components, and often deviate from a simplistic “low types are more willing to hide” argument. Through counterfactual analysis, I show how this more nuanced selection pattern changes what firms can infer from consumers’ privacy decisions and its implication on effective data buying strategies.

Figure 5: Willingness-to-Accept Distribution in Consumers’ Intrinsic Preferences for Demographic Information (Estimated via Hierarchical Bayes Model)

Citation

Lin, Tesary. “Valuing intrinsic and instrumental preferences for privacy.” Marketing Science 41.4 (2022): 663-681.

@article{lin2022valuing,
  title={Valuing intrinsic and instrumental preferences for privacy},
  author={Lin, Tesary},
  journal={Marketing Science},
  volume={41},
  number={4},
  pages={663--681},
  year={2022},
  publisher={INFORMS}
}
Awards and Recognitions
  • 2022 John Little Best Paper Award
  • 2019 Sheth Foundation ISMS Doctoral Dissertation Award
  • 2018 MSI Alden G. Clayton Doctoral Dissertation Proposal Award