The Value of Personal Information to Consumers of Online Services: Evidence from a Discrete Choice Experiment

Thu Jun 19 16:24:38 EDT 2014
By Sarah Butler and Dr. Garrett Glasgow

In this NERA study, Vice President Sarah Butler and Senior Consultant Dr. Garrett Glasgow examine the extent to which consumers will allow or prohibit uses of their personal information by using survey and modeling-based techniques to quantify the value that consumers place on their personal information. Recent years have seen rapid growth in privacy-related litigation. While the most high-profile cases have involved data security breaches at large retailers, a growing number of cases involve data collection and sharing done by legitimate companies -- that is, companies that collect user data and sell this information on to third party advertisers and vendors.

Despite the growth of legal suits involving data collection and data privacy, many areas of the law and economics surrounding these matters remain undetermined. One of the central economic issues in a data privacy case is the alleged harm to consumers caused by the breach of privacy. Unless the private or personal data have been used in an unauthorized transaction, the framework for establishing legal and economic harm in this area is unclear, even in cases involving the exposure of personal financial information such as credit card numbers and security PINs.

While there are academic papers evaluating the extent to which consumers will allow or prohibit uses of their personal information, empirical data that quantify the value of personal data are rare. There is even less information on how much consumers would be willing to pay to keep their data private or how much they would want to be compensated for the use of their information. This study fills this gap.