Privacy Decision-Making in Digital Markets: Eliciting Individuals’ Preferences for Transparency

Abstract

Consumers often lack information about how online services collect, use and protect their data. Therefore, transparency is frequently touted as an essential instrument to support consumers in assessing privacy risks and making more informed decisions. In this context, empirical studies have investigated the effectiveness of transparency in different privacy contexts. However, whether individuals actually prefer transparency when given a chance to avoid information about privacy risks is less clear. Thus, we investigate how individuals choose between options with more and less transparency about an uncertain data loss. In this paper, we present the design of an online experiment where student subjects choose between a situation of risk, where a loss of personal data will occur with a known probability, and a situation of ambiguity, where a data loss will occur with an unknown probability. Previous experiments on uncertain money losses show that individuals may not universally prefer the more transparent option where information about risks is made explicit. Therefore, our study sheds light on individuals' transparency preferences when facing privacy risks and provides insights into privacy decision-making under uncertainty. Thus, we contribute to a better understanding of digital service providers' incentives to offer consumers more transparency about their data use, which has direct implications for transparency regulation in data-driven digital markets.