Privacy and Money: It Matters

26 Pages Posted: 7 Feb 2019

See all articles by Emanuele Borgonovo

Emanuele Borgonovo

Bocconi University - Department of Decision Sciences

Stefano Caselli

Bocconi University - Department of Finance

Alessandra Cillo

Bocconi University - Department of Decision Sciences

Donato Masciandaro

Bocconi University - Department of Economics

Giovanni Rabitti

Bocconi University - Baffi Carefin Centre

Date Written: February 2019

Abstract

One sentence summary: Do people see privacy as an attribute of media of payment?

In the economic literature, a medium of payment has two properties: liquidity and store of value. The fast and increasing development of digital currencies raises the question: is privacy a third attribute? We test these assertions through a laboratory experiment. From the theoretical viewpoint, the experiment relies on the simultaneous combination of Keynes’s traditional demand for money and Friedman’s forward looking intuition on the role of privacy. Results show that privacy positively matters and increases the overall appeal of a medium of payment, even more for risk prone individuals. Given privacy, the sacrifice ratio between liquidity risk and opportunity cost is relatively high. Within the current debate, the experiment suggests that the future competition between alternative currencies will depend on how the three properties will be mixed in a way consistent with the individual’s preferences.

Keywords: Money Demand, Cryptocurrencies, Central Bank Digital Currencies, Behavioural Economics

Suggested Citation

Borgonovo, Emanuele and Caselli, Stefano and Cillo, Alessandra and Masciandaro, Donato and Rabitti, Giovanni, Privacy and Money: It Matters (February 2019). BAFFI CAREFIN Centre Research Paper No. 2019-108. Available at SSRN: https://ssrn.com/abstract=3330494 or http://dx.doi.org/10.2139/ssrn.3330494

Emanuele Borgonovo

Bocconi University - Department of Decision Sciences ( email )

Via Roentgen 1
Milan, 20136
Italy

Stefano Caselli

Bocconi University - Department of Finance ( email )

Via Roentgen 1
Milano, MI 20136
Italy

Alessandra Cillo

Bocconi University - Department of Decision Sciences ( email )

Via Roentgen 1
Milan, 20136
Italy

Donato Masciandaro (Contact Author)

Bocconi University - Department of Economics ( email )

Via Gobbi 5
Milan, 20136
Italy

Giovanni Rabitti

Bocconi University - Baffi Carefin Centre ( email )

Via Roentgen 1
Milan
Italy

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