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Is the market for digital privacy a failure?

Authors
  • Fuller, Caleb S.1
  • 1 Grove City College, Grove City, PA, USA , Grove City (United States)
Type
Published Article
Journal
Public Choice
Publisher
Springer US
Publication Date
Feb 13, 2019
Volume
180
Issue
3-4
Pages
353–381
Identifiers
DOI: 10.1007/s11127-019-00642-2
Source
Springer Nature
Keywords
License
Yellow

Abstract

Conventional wisdom holds that the market for digital privacy fails owing to widespread informational asymmetry between digital firms and their customers, behavioral biases exhibited by those customers, and negative externalities from data resale. This paper supplies both theoretical and empirical reasons to question the standard market failure conclusion. On the theoretical side, I argue that digital markets are not qualitatively different from markets for other consumer goods. To wit, just as in traditional markets, it is costly to measure product attributes (such as “privacy”) and, just as in more traditional settings, some firms offer credible commitments to reduce the threat of potential opportunism. On the empirical side, I conduct a survey of Google’s users. The most important results of this survey suggest that, at least with respect to Google, (a) the extent of informational asymmetry is minimal and (b) the demands for “unconstrained” and “constrained” privacy diverge substantially. Significantly, 86% of respondents express no willingness to pay for additional privacy when interacting with Google. Among the remaining 14%, the average expressed willingness to pay is low.

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