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Searching for Privacy in all the Wrong Places: A behavioral economics perspective on individual concern for privacy George Loewenstein WEIS, 2007.

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Presentation on theme: "Searching for Privacy in all the Wrong Places: A behavioral economics perspective on individual concern for privacy George Loewenstein WEIS, 2007."— Presentation transcript:

1 Searching for Privacy in all the Wrong Places: A behavioral economics perspective on individual concern for privacy George Loewenstein WEIS, 2007

2 Ed Lazear, "Economic Imperialism" Economic Journal,2000. ECONOMICS  political science history demography law ….. spending/saving insurance labor market behavior bargaining investing medical decision making gambling criminal behavior fertility/sex charity/altruism dieting addiction suicide "individuals engage in maximizing rational behavior"

3 Behavioral Economics ECONOMICS  psychology neuroscience medicine law ….. spending/saving insurance labor market behavior bargaining investing medical decision making gambling criminal behavior fertility/sex charity/altruism dieting addiction suicide Behavior is often not ‘rational’

4 Behavioral economics is also imperialistic... behavioral finance behavioral labor economics behavioral public finance behavioral macroeconomics behavioral law and economics behavioral economics of information security?

5 Focus of this talk: behavioral economics applied to understanding individual concerns/ behavioral responses to issues of privacy

6 (neo)classical model of privacy Should I mention my sexual preferences on Facebook?

7 (neo)classical model of privacy Maybe I’ll find a lover... But what about my future job prospects? And what if my parents happen to log on...

8 (neo)classical model of privacy Privacy $s WTA WTP

9 Will discuss some complications... 1.Adaptation and loss aversion 2.Hyperbolic time-discounting 3.Preference uncertainty/constructed preferences... then outline a simple perspective on individual privacy and present experimental tests of a few of its implications

10 1. Adaptation and loss aversion Adaptation: People become accustomed to diverse circumstances –ownership –wealth –disabilities Loss aversion: People dislike losing things relative to their present circumstances, but are often relatively indifferent to gaining those same things (loss aversion) Also, people fail to predict these effects

11 Evidence of adaptation: health conditions Brickman, Coates, and Janoff-Bulman (1978) Surprisingly small difference in self-reported happiness (on 5 point scale) between paraplegics and matched controls: –paraplegics 2.96 –controls 3.82 Wortman and Silver (1987): quadriplegics reported no greater frequency of negative affect than control respondents! Tyc (1992): “ no difference in quality of life or psychiatric symptomatology ” in young patients who had lost limbs to cancer compared with those who had not

12 Another manifestation of adaptation and loss aversion: the endowment effect Departures from reference point Value Kahneman & Tversky (1979) hate to lose don’t particularly like to gain

13 An illustrative study College student subjects 6 attractive objects (e.g., ipod Nano, noise cancelling headphones) 18 prices from 5% to 95% of retail price Buy, sell, and choose trials 2 of 6 products randomly assigned to each condition (buy, sell, choose) for each subject. Subjects given two “sell” items to keep, and $20 One of each type of trial counts

14 Sell iPod Nano? $50

15 Buy Digital Camera? $40

16 Choose Wireless Mouse? $45 (get product) (get money)

17 Choose Money? $55 (get money) (get product)

18 Mean prices by condition

19 Subjects: 27 CMU undergraduates & 39 Pitt MBAs Procedure: 1. All shown mug 2. Half predict how much they would sell it for 3. All given a mug and opportunity to sell ________________________________________________________ Predicted and Actual Valuation of the mug n of predictedactual GroupConditionsubjectsvaluevalue CMUPrediction14$3.73$5.40 (0.41)(0.65) No prediction $6.46 (0.54) PITTPrediction22$3.27$4.56 (0.48)(0.59) No prediction $4.98 (std. errors in parentheses) (.53) People don’t anticipate adaptation (illustrated with the endowment effect)

20 Implications for privacy People will initially oppose losses of privacy After loss of privacy, however, they will rapidly adapt People will not be very motivated to gain new forms of privacy Privacy $s WTA WTP

21 Concern about global warming as a function of problem severity (theoretical analysis)

22 Concern about global warming as a function of problem severity (theoretical analysis)

23 2. Time-discounting Ideal: people balance present and future costs & benefits in an even-handed fashion Reality: people place disproportionate weight on the present, relative to all future periods; ‘hyperbolic time discounting’ Especially true of: –young people –people who are in emotional states –people who are distracted

24 'Schindler's List' study Our collection... Lowbrow movies The Breakfast Club (1985; 2.3) Clear and Present Danger (1994; 2.8) Four Weddings and a Funeral (1993; 3.1) Groundhog Day (1993; 2.4) I Love Trouble (1994; 2.0) In the Line of Fire (1993; 3.0) Indecent Proposal (1994; 2.9) The Mask (1994; 1.6) Mrs Doubtfire (1993; 2.9) My Cousin Vinny (1992; 3.0) Sleepless in Seattle (1993; 2.5) So I married an Axe Murderer (1993; 2.3) The Specialist (1994; 2.1) Speed (1994; 2.5) Highbrow movies Blue (1993; 5.1) (subtitled) Blue Sky (1994; 3.8) (Oscar winner) Dear Diary (1994; 3.1) (subtitled) Hoop Dreams (1993; 3.3) (documentary) Like Water for Chocolate (1993; 4.5) (subtitled) Naked (1993; 4.0) Raise the Red Lantern (1991; 3.7) (subtitled) Schindler's List (1993; 6.8) (Oscar winner) The Piano (1993; 5.7) (Oscar winner) The Scent of Green Papaya (1993; 3.8) (subtitled) In exchange for completing an unrelated survey, subjects receive three free video loans from our collection

25 Percent of highbrow movies chosen for each day of choice Experiment 1 Day of Choice ConditionOneTwoThree Sequential42%47%44% Simultaneous44%63%71% Schindler's list chosen only once to be watched on the day of choice; 13 times on future days. Conditions: sequential: Subjects choose each movie on the day when they will watch it simultaneous: Subjects choose all three movies on the first day (when they will watch the first movie) Results:

26 Implications for privacy: People won’t weigh short-term benefits of divulgence against long-term consequences for privacy in even- handed fashion

27 Intertemporal choice as a metaphor Early view: single discount rate for individual applies to all forms of consumption. Then... –Steeper discounting for shorter time delays (hyperbolic t.d.) –Steeper discounting for small outcomes than large outcomes (Thaler, 1981) –Steeper discounting for gains than for losses (Thaler, 1981) –Steeper discounting for delay than for speed-up (Loewenstein, 1988) –Negative discounting for sequences (e.g., Loewenstein & Prelec, 1993)

28 Present ‘state of the art’: multiple motives (Frederick & Loewenstein, under review)

29 53% 47% Pricing Allocation Choice $67 $78 $75

30 Privacy similar to intertemporal choice... Multiple motives in decisions involving privacy –Encouraging divulgence: material benefits to exchange of information desire to be known (e.g., myspace, facebook, posting of personal pictures), for fame (or even notoriety) desire to be part of a group –Discouraging divulgence: material consequences innate/inchoate qualms about revealing information Which motives dominate likely to depend on subtle factors, e.g., –medium ( , web, phone, face-to-face) –Warnings Often what matters is not what should matter – e.g., versus phone

31 3. Preference uncertainty & constructed preferences People don’t know what they want or what they care about However, people often respond sensibly to changes in their environment  ‘coherent arbitrariness’

32 Illustrative Study (Experiment 4, from Ariely, Loewenstein & Prelec, 2003) Stimuli: Unpleasant noises played over headphones Anchor manipulation. Hypothetically.. "would you listen to this noise for 300 seconds for $x.00?" (anchor based on first three digits of subject’s social security number – e.g., 478 = $4.78) Subjects listen to sample noise for 300 seconds Subjects state WTA for 3 noises that differ in duration: increasing condition: 100 sec, 300 sec, 600 secs. decreasing condition: 600 sec, 300 sec, 100 secs. Truthful elicitation procedure; if WTA

33 Results

34 Coherent arbitrariness can be seen in numerous domains, e.g., –labor supply –criminal deterrence –financial markets (efficient markets)

35 Implication for privacy: people don’t have a clue about how important privacy is; however, they are likely to respond sensibly to changes

36 Putting the pieces together; A behavioral perspective on concern for privacy: People generally not concerned about privacy Many other motives are more powerful – e.g., desire to be known, desire for fame Only concerned about privacy if alerted that privacy could be or is being violated and could have consequences –Cues: Warnings Prying Explicit comparisons (of privacy to no privacy)

37 Two studies of privacy (collaborations with Alessandro Acquisti and Leslie John)

38 Study 1: paradoxical effects of reassurance Thesis: If people don’t naturally think about privacy, then reassuring them can potentially cause them to be more rather than less cautious about divulging information

39 Design Survey respondents asked for , then asked 14 questions, 6 about sensitive information Three conditions: –No privacy/anonymity assurance –Weak assurance “A quick note to let you know that any identifying information you may choose to provide in this survey will be stored separately from your responses. In addition, your survey responses will only be analyzed in aggregate.” –Strong assurance “Concerning the confidentiality and anonymity of your responses: Please be advised that maintaining the confidentiality and anonymity of your responses is of the utmost importance to us. The following procedure will be used to maintain your anonymity in analysis, publication, and presentation of any results. Anonymity will be maintained during data analysis and publication/presentation of results by any or all of the following means: (1) You will be assigned a number as names will not be recorded. (2) The researchers will save the data file by your number, not by name. (3) Only members of the research group will view collected data in detail. (4) Any recordings or files will be stored in a secured location accessed only by authorized researchers.”

40 Please answer the following questions, which refer to your educational experience since high school. YesNo 1. Since high school, have you ever handed an assignment in late? 2. Are you currently taking at least four courses? 3. Have you ever plagiarized text for any kind of assignment? 4. Have you ever let a classmate copy from you during an exam? 5. Do you arrive late to class more often than the majority of your classmates? 6. On average, do you find the number of students in your classes to be conducive to learning? 7. Have you ever failed a course? 8. Have you ever copied a classmate’s homework? 9. What is your grade point average? GPA: ____________ 10. Have you ever cheated on an exam? 11. Have you ever requested an extension for an assignment? 12. Do you regularly attend classes? 13. Have you ever lied to a teacher in order to avoid taking an exam or handing in a term paper on time? 14. Have you ever lied about your grade point average?

41 results 1.Most people would tell us almost anything and everything (even after giving us an address that could easily be used to identify them) 2.Small reassurance had little effect, but substantive reassurance backfired (as predicted)

42 Innocuous Questions (6) Probability of responding affirmatively

43 Sensitive Questions (6) Probability of responding affirmatively

44 Study 2: explicit versus implicit inquiries about sensitive behaviors

45 Initial page from which NYTs readers are diverted to different survey versions...

46

47 Three conditions.. Baseline: simply asks respondent whether or not they have ever engaged in 34 different behaviors ranging from very mild (e.g., leaving lights turned on) to very severe (e.g., cheating on taxes) Commission: asks respondents to rate how unethical the 34 activities are, but only if they have engaged in them Omission: asks respondents to rate how unethical the 34 activities are, but only if they have not engaged in them

48 commission condition Pilot Survey on Ethical Standards2. Pilot Survey on Ethical Standards 2 2 % PLEASE READ THIS NOTE! This is not the usual yada-yada! This is a study of ethical standards. In the next pages, you will be presented with a series of statements describing various behaviors. We are trying to determine which types of behaviors are seen as more or less ethical. We would like you to rate the extent to which you think each behavior is unethical. (If you believe that the behavior has nothing to do with ethics, choose the "Not at all unethical" option as your answer.) **NOTE: Because people are sometimes not objective about behaviors they have not personally engaged in, we are only interested in your ratings of behaviors in which you HAVE engaged. Therefore, ONLY IF you HAVE engaged in the given behavior (i.e. at least once), please RATE it. Otherwise, please leave all remaining items BLANK.** Example: Imagine that you are asked to judge how unethical it is to tell a white lie, and imagine that you have told at least one white lie in your life. You think it is only somewhat unethical. Then, in the following question, you would click on the "somewhat unethical" box. 1. I have read and understand these instructions. However, let's take an act that you have probably never committed: murdering someone. You believe that this is very unethical. However, in the following question, you would NOT click on the "extremely unethical" box, since you have never performed that behavior. Ok?However, let's take an act that you have probably never committed: murdering someone. You believe that this is very unethical. However, in the following question, you would NOT click on the "extremely unethical" box, since you have never performed that behavior. Ok? Yes.Yes. 2. Pilot Survey on Ethical Standards2. Pilot Survey on Ethical Standards 2 2 % PLEASE READ THIS NOTE! This is not the usual yada-yada! This is a study of ethical standards. In the next pages, you will be presented with a series of statements describing various behaviors. We are trying to determine which types of behaviors are seen as more or less ethical. We would like you to rate the extent to which you think each behavior is unethical. (If you believe that the behavior has nothing to do with ethics, choose the "Not at all unethical" option as your answer.) **NOTE: Because people are sometimes not objective about behaviors they have not personally engaged in, we are only interested in your ratings of behaviors in which you HAVE engaged. Therefore, ONLY IF you HAVE engaged in the given behavior (i.e. at least once), please RATE it. Otherwise, please leave all remaining items BLANK.** Example: Imagine that you are asked to judge how unethical it is to tell a white lie, and imagine that you have told at least one white lie in your life. You think it is only somewhat unethical. Then, in the following question, you would click on the "somewhat unethical" box. 1. I have read and understand these instructions. However, let's take an act that you have probably never committed: murdering someone. You believe that this is very unethical. However, in the following question, you would NOT click on the "extremely unethical" box, since you have never performed that behavior. Ok?However, let's take an act that you have probably never committed: murdering someone. You believe that this is very unethical. However, in the following question, you would NOT click on the "extremely unethical" box, since you have never performed that behavior. Ok? Yes.Yes.

49 commission condition...

50 Have you ever engaged in behavior (yes/no)? (n=241) Commission (answer only if you have EVER engaged in behavior) (n=237) Omission (answer only if you have NEVER engaged in behavior (n=213) Stealing something worth more than $1008.3%16.6%15.5% Having sex with someone who is too drunk to know what they are doing 5.3%15.2%13.5% Trying to gain access to someone else’s (e.g., a partner, friend or colleague’s) account 31.5%26.6%33.8% Making a false insurance claim5.8%8.9%22.1% Cheating on one’s tax return15.8%17.3%28.2% Having sex with the current husband, wife or partner of a friend 9.6%13.9%25% Mean12.7%16.4%23.0% Results..

51 Conclusions Most people don’t inherently care much about privacy Individual intuitions and emotions provide a poor guide to privacy-related behavior New technologies... –greatly magnify the risks – e.g., internet posting cannot be undone –eliminate danger cues -- e.g., flaming –introduce new cues (e.g., indications of community) that actually mute privacy concern – e.g., Facebook  need for new regulation or greater tolerance for individual idiosyncrasies

52


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