The psychology of privacy—what can Behavioural Economics contribute to competition in digital markets?

Abstract

... Explaining the drivers of decision-making has been the object of the study for multiple disciplines, including psychology, sociology, economy, and law. In recent decades, tensions have emerged between those who believe predictability of choices is necessary for the accuracy of economic predictions, and those who consider that human behaviour cannot be explained exclusively through abstract prepositions.1 In an early paper titled ‘The Psychology of Choice and the Assumptions of Economics’, Nobel laurate Richard Thaler explained how behavioural insights trumped economic assumptions. He noted that principles of rationality which are used by economists to describe actual choices, and which are accepted as normative principles, can be proved incorrect by behavioural evidence.2 This can be done by looking at how people actually behave in relation to a specific choice that is put up for consideration. This is also a departing point for our discussion. There seems to be a gap regarding how consumers are expected to behave towards their privacy and what they actually do. For example, surveys show that Europeans care a lot about their privacy and the protection of their personal data, which are at the same time two distinctive fundamental rights recognized in the European Union (EU) Charter.3 However, their online behaviour often does not seem to correspond to that scale of values.