The Privacy Elasticity of Behavior: Conceptualization and Application

Abstract

We propose and initiate the study of privacy elasticity—the responsiveness of economic variables to small changes in the level of privacy given to participants in an economic system. Individuals rarely experience either full privacy or a complete lack of privacy; we propose to use differential privacy—a computer-science theory increasingly adopted by industry and government—as a standardized means of quantifying continuous privacy changes. The resulting privacy measure implies a privacy-elasticity notion that is portable and comparable across contexts. We demonstrate the feasibility of this approach by estimating the privacy elasticity of public-good contributions in a lab experiment.

Keywords: privacy elasticity, differential privacy, privacy guarantees, visibility, economic experiments, public-good game

JEL Classification: C91, D82, Z00