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The Value of Online Privacy

48 Pages Posted: 18 Oct 2013  

Scott Savage

University of Colorado at Boulder - Department of Economics

Donald M. Waldman

University of Colorado at Boulder - Department of Economics

Date Written: October 16, 2013

Abstract

We estimate the value of online privacy with a differentiated products model of the demand for Smartphone apps. We study the apps market because it is typically necessary for the consumer to relinquish some personal information through “privacy permissions” to obtain the app and its benefits. Results show that the representative consumer is willing to make a one-time payment for each app of $2.28 to conceal their browser history, $4.05 to conceal their list of contacts, $1.19 to conceal their location, $1.75 to conceal their phone’s identification number, and $3.58 to conceal the contents of their text messages. The consumer is also willing to pay $2.12 to eliminate advertising. Valuations for concealing contact lists and text messages for “more experienced” consumers are also larger than those for “less experienced” consumers. Given the typical app in the marketplace has advertising, requires the consumer to reveal their location and their phone’s identification number, the benefit from consuming this app must be at least $5.06.

Keywords: advertising, experience, consumer demand, privacy

JEL Classification: C81, D80, L13, L86

Suggested Citation

Savage, Scott and Waldman, Donald M., The Value of Online Privacy (October 16, 2013). Available at SSRN: https://ssrn.com/abstract=2341311 or http://dx.doi.org/10.2139/ssrn.2341311

Scott Savage (Contact Author)

University of Colorado at Boulder - Department of Economics ( email )

Campus Box 256
Boulder, CO 80309
United States
303-735-1165 (Phone)
303-492-1112 (Fax)

HOME PAGE: http://holiday.colorado.edu/savages/

Donald M. Waldman

University of Colorado at Boulder - Department of Economics ( email )

Campus Box 256
Boulder, CO 80309-0256
United States
303-492-6781 (Phone)
303-492-8960 (Fax)

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