Digital Hermits

30 Pages Posted: 31 Jan 2023 Last revised: 16 Mar 2024

See all articles by Jeanine Miklós-Thal

Jeanine Miklós-Thal

University of Rochester - Simon Business School

Avi Goldfarb

University of Toronto - Rotman School of Management

Avery Haviv

University of Rochester - Simon Business School

Catherine E. Tucker

Massachusetts Institute of Technology (MIT) - Management Science (MS)

Multiple version iconThere are 2 versions of this paper

Date Written: March 12, 2024

Abstract

When users share multi-dimensional data about themselves with a firm, the firm learns about
the correlations of different dimensions of user data. We incorporate this type of learning into
a model of a data market in which a firm acquires data from users with privacy concerns. Each
user can share no data, only non-sensitive data, or their full data with the firm. As the firm
collects more data and becomes better at drawing inferences about a user’s privacy-sensitive
data from their non-sensitive data, the share of new users who share no data (”digital hermits”)
grows. This growth of digital hermits occurs although the firm offers higher compensation for a
user’s non-sensitive data and a user’s full data as its ability to draw inferences improves. At the
same time, the share of new users who share their full data also grows. The model thus predicts
a polarization of users’ data sharing choices away from non-sensitive data sharing to no sharing
and full sharing. Our model suggests that recent privacy policies, which are focused on control
of data rather than inferences, may be misplaced.

Keywords: data, privacy, informational externalities, prediction, digital markets

JEL Classification: D42, D82, D83, L20

Suggested Citation

Miklós-Thal, Jeanine and Goldfarb, Avi and Haviv, Avery and Tucker, Catherine E., Digital Hermits (March 12, 2024). MIT Sloan Research Paper No. 6877-23, Available at SSRN: https://ssrn.com/abstract=4339624 or http://dx.doi.org/10.2139/ssrn.4339624

Jeanine Miklós-Thal (Contact Author)

University of Rochester - Simon Business School ( email )

Rochester, NY 14627
United States

Avi Goldfarb

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada
416-946-8604 (Phone)
416-978-5433 (Fax)

Avery Haviv

University of Rochester - Simon Business School ( email )

Rochester, NY 14627
United States

Catherine E. Tucker

Massachusetts Institute of Technology (MIT) - Management Science (MS) ( email )

100 Main St
E62-536
Cambridge, MA 02142
United States

HOME PAGE: http://cetucker.scripts.mit.edu

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