We measure willingness to pay for privacy in a field experiment. Participants were given the choice to buy a maximum of one DVD from one of two online stores. One store consistently required more sensitive personal data than the other, but otherwise the stores were identical. In one treatment, DVDs were one Euro cheaper at the store requesting more personal information, and almost all buyers chose the cheaper store. Surprisingly, in the second treatment when prices were identical, participants bought from both shops equally often.privacy, willingness to pay, field experiments

Alastair R. Beresford

Dorothea Kübler

Sören Preibusch

English

Research Papers in Economics

 
 
 
 
 
 
 
 
 
 
 
SFB 649 Discussion Paper 2011-010 
Unwillingness to  
Pay for Privacy:  
A Field Experiment 
 
Alastair R. Beresford* 
Dorothea Kübler** 
Sören Preibusch*  
 
 
* University of Cambridge, United Kingdom 
** Wissenschaftszentrum Berlin für Sozialforschung (WZB), Germany 
 
 
 
 
This research was supported by the Deutsche 
Forschungsgemeinschaft through the SFB 649 "Economic Risk". 
 
http://sfb649.wiwi.hu-berlin.de 
ISSN 1860-5664 
 
SFB 649, Humboldt-Universität zu Berlin 
Spandauer Straße 1, D-10178 Berlin 
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Unwillingness to Pay for Privacy: A Field Experiment* 
 
Alastair R. Beresford, University of Cambridge, UK 
Dorothea Kübler**, Social Science Research Center (WZB) and Technical University Berlin 
Sören Preibusch, University of Cambridge, UK 
 
Abstract 
We measure willingness to pay for privacy in a field experiment. Participants were given the 
choice to buy a maximum of one DVD from one of two online stores. One store consistently 
required more sensitive personal data than the other, but otherwise the stores were identical. 
In one treatment, DVDs were one Euro cheaper at the store requesting more personal 
information, and almost all buyers chose the cheaper store. Surprisingly, in the second 
treatment when prices were identical, participants bought from both shops equally often. 
Key words: privacy; willingness to pay; field experiments. 
JEL Codes: C93, D12 
*Acknowledgements: We thank Wei Min Wang and Mark Henninger for valuable research 
assistance. Financial support from the SFB649 (”Economic Risk”) is gratefully 
acknowledged. 
**Corresponding author: Social Science Research Center Berlin (WZB), Reichpietschufer 
50, D-10785 Berlin, Germany, email: kuebler@wzb.eu, phone: +49 30 25491 440, fax: +49 30 
25491 400.  2 
 
1. Introduction 
The economics of privacy is controversial. The Chicago School (Posner, 1981) argues that 
privacy protection harms efficiency. In contrast, it has been asserted that property rights over 
the private data of individuals lead to the efficient outcome (Shapiro and Varian, 1997). But 
this view is contested, too. First, privacy may lead to efficient equilibrium outcomes even if 
people do not appreciate it individually (Hermalin and Katz, 2006; Wathieu 2009). Second, 
many contracts involving personal data are incomplete or highly opaque, as they typically 
lack clear-cut information about secondary uses and sharing of personal information, thereby 
limiting consumers’ ability to understand what their data are used for, even retrospectively. 
Up to now, economists have not systematically studied choices regarding privacy in such 
environments. 
It has been observed that consumers express concerns regarding misuse of personal data yet 
continue to provide personal data on social networks and online shopping sites.
1 To 
understand this behavior, observations from a natural environment have the disadvantage that 
the (unobservable) cost of switching to another supplier affects choices. Relatedly, present-
biased preferences have been put forward as an explanation of inconsistent privacy choices 
(Acquisti, 2004). In our experiment, we are able to control for both explanations as there are 
two competing online stores that differ with respect to the mandatory data collected, and 
buying at the more privacy-friendly store does not prolong shopping time nor does it affect 
delivery time.
2 Moreover, we do not draw attention to the issue of privacy as a whole (as in 
Tsai, 2007, where privacy ratings in search engines encourage consumers to choose more 
                                                            
1 See for example Acquisti and Grossklags (2005). 
2 In an experiment by Berendt et al. (2005) with a monopoly online store, present-biased preferences 
are a potential source of observed privacy choices. 3 
 
privacy-friendly companies despite higher prices), but simply confront consumers with 
different data requirements at the two shops.  
      
2. Experimental design 
Participants were given the opportunity to buy one DVD from one of two online stores, 
named “SilverDisc Frankfurt” and “SilverDisc Cologne”. SilverDisc is a multichannel retailer 
of DVDs selling through Amazon, its own online shop, and a local branch in Berlin. The two 
branches in Frankfurt and Cologne are fictitious, but were chosen (with consent from 
SilverDisc) to minimize any differences between the two stores. All personal data provided by 
participants were given to SilverDisc and to Amazon as part of the transaction to purchase the 
DVD; this was explained in the instructions. On the order form, participants ticked a box to 
confirm they agreed with the data protection regulations and general terms and conditions of 
SilverDisc and Amazon, which were available upon request from the experimenters. 
A selection of DVDs was presented to the participants and listed on two order forms, one for 
“SilverDisc Frankfurt” and one for “SilverDisc Cologne”, that were presented side-by-side to 
minimize search costs.
3 Participants were also free to search via a desktop computer for other 
DVDs and print new order forms. Two treatments were conducted. In both treatments, the 
mandatory data items for the two online shops were kept constant. While last name, first 
name, postal and email address were mandatory for both shops, “SilverDisc Frankfurt” also 
required a date of birth and monthly income, whereas “SilverDisc Cologne” asked for the year 
of birth and favorite color as mandatory fields.
4 In treatment EQ, the prices at the two shops 
                                                            
3 Instructions and order forms are posted on http://www.wzb.eu/mp/vam/publications/journals.de.htm. 
4 Neither Amazon nor SilverDisc ask for income and favorite color. Thus, these data items had not 
been provided before by subjects who had already shopped at the online stores (75% with Amazon and 
11% with SilverDisc). 
 4 
 
were equal, whereas in treatment DIF all prices at “SilverDisc Frankfurt” were exactly one 
Euro less than the prices at “SilverDisc Cologne”. Thus, in DIF there was a trade-off between 
data requirements and prices as subjects found information on personal income more sensitive 
than on favorite color (see Section 3).  
After subjects had made their purchase decision, they were asked to answer a post-
experimental questionnaire. Apart from some general questions, we asked participants how 
willing they are in general to provide personal data such as income and favorite color as well 
as other items. And we asked those who made a purchase how satisfied they were with the 
chosen store regarding privacy and price. 
All 225 participants in the experiment (students from the Technical University Berlin) 
received a show-up fee of 6 Euros which they received regardless of whether they made a 
purchase. In addition, all orders were subsidized by a discount of 7 Euros. The quoted price 
on the order form corresponded to the Amazon.de retail price plus the Amazon.de shipping 
costs (3 Euros) minus 1 Euro for “SilverDisc Frankfurt” in treatment DIF. 
 
3. Results 
Of the 225 participants, 74 made a purchase.
5 Table 1 provides an overview of the results 
from both treatments DIF and EQ. In DIF, 39 of the 42 purchases were made at “SilverDisc 
Frankfurt” where prices were 1 Euro lower. Thus, participants predominantly chose the firm 
with the lower price and the more sensitive data requirement, indicating that they are willing 
to provide information about their monthly income and date of birth for a 1 Euro discount.  
To establish a benchmark of privacy concerns in purchasing decisions, we conducted 
treatment EQ in which the two firms asked for the same price, but differed with respect to the 
                                                            
5  Less than 9% of the non-buyers mentioned privacy concerns or lack of trust as the main reason for 
not buying while the majority indicated the product or its price. 
 5 
 
data items required for the transaction. In this treatment, approximately the same number of 
participants purchased a DVD at “SilverDisc Frankfurt” and “SilverDisc Cologne”. Thus, the 
more privacy friendly firm failed to attract more customers even though prices were equal at 
both stores.  
The results of treatment EQ are surprising given the preferences over mandatory data items 
provided by subjects in the post-experimental questionnaire (Table 2). In treatment DIF, the 
fact that 32 out of 39 participants shopped with Frankfurt but reported a lower willingness to 
report income (required by the Frankfurt branch) than favorite color (required by the Cologne 
branch) can be rationalized with the price difference. However in EQ, 8 of the 15 customers 
of Frankfurt said they were less happy providing the data required by Frankfurt than by 
Cologne (with 6 being neutral and 1 preferring to provide the data asked for by Frankfurt).
6 In 
addition, we asked customers to rate their satisfaction with price and privacy policy of the 
chosen store (see Table 3). All Frankfurt buyers in EQ who responded to a question 
concerning satisfaction with the privacy practices of Frankfurt (13 of 15) were dissatisfied.
7 
The results can be explained if participants (mainly students) are unconcerned about privacy 
issues. However, in the post-experimental questionnaire 75% of the participants indicated that 
they have a very strong interest in data protection, and 95% said that they are interested in the 
protection of their personal information. Thus, participants’ concerns were slightly higher 
than those reported in the Eurobarometer Survey (Gallup, 2008). 
                                                            
6  This is evidence against the hypothesis of private benefits or indifference when providing personal 
information, but collective costs in our setup (Wathieu 2009).  
7  Table 3 also shows that participants noticed the difference in data requirements and prices between 
the two firms. Those who shopped with Cologne in treatment EQ were significantly more satisfied 
with the firm’s privacy policy than those who shopped with Frankfurt. In treatment DIF, those 
shopping with Frankfurt were significantly happier with the prices than those shopping with Cologne.  6 
 
Providing false information is one method of protecting personal information. But except for 
one student who did not indicate his income, all subjects provided values that were reasonable 
in magnitude. 
 
4. Conclusion 
The experiment demonstrates an unwillingness to pay for privacy as the vast majority of 
subjects provide their monthly income for a price discount of one Euro. Even without a price 
discount, only half of the subjects shopped with the more privacy-friendly branch of the DVD 
retailer. This result is surprising given that most subjects who provide sensitive information 
are dissatisfied with it. Thus, observed behavior can neither be explained by a lack of 
awareness of privacy issues, nor can it be rationalized as a resolution of the trade-off between 
price and data protection in favor of price.  
Two interpretations are possible: either the stated dissatisfaction with data collection and 
privacy protection can be regarded as uninformative as it is uncorrelated with choices, or 
behavior in the experiment is not in line with revealed-preference theory. In the latter case, the 
results shed doubt on the view that pure assignment of property rights in personal information 
is sufficient to achieve efficiency.   7 
 
References 
 
Acquisti, A. (2004). Privacy in Electronic Commerce and the Economics of Immediate 
Gratification. Proceedings of the ACM Electronic Commerce Conference (ACM EC), ACM, 
p. 21-29. 
 
Acquisti, A. and J. Grossklags (2005). Privacy and Rationality in Individual Decision 
Making. IEEE Security and Privacy, p. 24-30. 
 
Berendt, B., Günther, O. and S. Spiekermann (2005). Privacy in E-Commerce: Stated 
Preferences vs. Actual Behavior. Communication of the ACM (CACM), vol. 48, no. 3. 
 
Gallup Organization: Data Protection in the European Union – Citizens’ Perceptions (2008). 
Analytical Report. Flash Eurobarometer Series. 
 
Hermalin, B. E. and M. L. Katz (2006). Privacy, Property Rights and Efficiency. Quantitative 
Marketing and Economics, 4, pp. 209–239. 
 
Posner, R. A. (1981). The Economics of Privacy. American Economic Review, 71, pp. 405-
09. 
 
Shapiro, C. and H. Varian (1997). US Government Information Policy, unpublished 
manuscript, University of California, Berkeley. 
 8 
 
Tsai, J., S. Egelman, L. Cranor and A. Acquisti (2007). The Effect of Online Privacy 
Information on Purchasing Behavior: An Experimental Study. Workshop on the Economics of 
Information Security (WEIS). 
 
Wathieu, L. (2009). Privacy as Resistance to Segmentation. Mimeo. 9 
 
TABLES 
 
Table 1. Number of purchases at the two stores per treatment.   
Treatment “SilverDisc  Frankfurt” 
(income/date of birth) 
“SilverDisc Cologne” 
(favorite color/year of birth)
EQ 15  17 
DIF 39  3 
 
 
 
Table 2. Sensitivity of mandatory data items.  
  Less willing to provide 
data mandatory at 
 
 
Treatment Bought  at Cologne Frankfurt Neutral
EQ Cologne  0  17 0 
 Frankfurt  1  8  6 
DIF Cologne  0  3  0 
 Frankfurt  0  32  7 
Note: This table reports on the answers to the question “When you are asked for data, how 
willing are you to provide the following items?” Income and favorite color were listed among 
a number of other items. 10 
 
 
Table 3. Absolute frequencies of satisfaction after purchase decision. 
Treatment    Bought at
Satisfaction 
High 
Satisfaction 
Low 
Significance 
(Fisher’s Exact)
EQ Price  Frankfurt  2 10 p=0.67 
   Cologne  4  12   
 Privacy  Frankfurt  0 13  p=0.05 
   Cologne  5  11   
DIF Price  Frankfurt  24 12 p=0.05 
   Cologne  0  3   
 Privacy  Frankfurt  10  27  p=0.21 
   Cologne  2  1  
Note: This table reports on the answers to the question “How satisfied are you with the chosen 
store regarding price and privacy?” (Satisfaction values z-transformed; missing data for 
participants exactly between high and low; p-values two-tailed). 
  
 
 
 
SFB 649 Discussion Paper Series 2011 
 
For a complete list of Discussion Papers published by the SFB 649, 
please visit http://sfb649.wiwi.hu-berlin.de. 
 
001  "Localising temperature risk" by Wolfgang Karl Härdle, Brenda López 
Cabrera, Ostap Okhrin and Weining Wang, January 2011. 
002  "A Confidence Corridor for Sparse Longitudinal Data Curves" by 
Shuzhuan Zheng, Lijian Yang and Wolfgang Karl Härdle, January 2011. 
003  "Mean Volatility Regressions" by Lu Lin, Feng Li, Lixing Zhu and 
Wolfgang Karl Härdle, January 2011. 
004  "A Confidence Corridor for Expectile Functions" by Esra Akdeniz Duran, 
Mengmeng Guo and Wolfgang Karl Härdle, January 2011.  
005  "Local Quantile Regression" by Wolfgang Karl Härdle, Vladimir Spokoiny 
and Weining Wang, January 2011.  
006  "Sticky Information and Determinacy" by Alexander Meyer-Gohde, 
January 2011. 
007   "Mean-Variance Cointegration and the Expectations Hypothesis" by Till 
Strohsal and Enzo Weber, February 2011. 
008  "Monetary Policy, Trend Inflation and Inflation Persistence" by Fang Yao, 
February 2011. 
009  "Exclusion in the All-Pay Auction: An Experimental Investigation" by 
Dietmar Fehr and Julia Schmid, February 2011. 
010  "Unwillingness to Pay for Privacy: A Field Experiment" by Alastair R. 
Beresford, Dorothea Kübler and Sören Preibusch, February 2011.  
 
 
SFB 649, Ziegelstraße 13a, D-10117 Berlin 
http://sfb649.wiwi.hu-berlin.de 
 
This research was supported by the Deutsche 
Forschungsgemeinschaft through the SFB 649 "Economic Risk". 

Unwillingness to Pay for Privacy: A Field Experiment

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