The Privacy Elasticity of Behavior: Conceptualization and Application

We propose and initiate the study of privacy elasticity--the responsiveness of economic variables to small changes in the level of privacy given to participants in an economic system. Individuals rarely experience either full privacy or a complete lack of privacy; we use differential privacy--a computer-science theory increasingly adopted by industry and government--as a standardized means of quantifying continuous privacy changes. The resulting privacy measure implies a privacy-elasticity notion that is portable and comparable across contexts. We discuss applications, and demonstrate the feasibility of this approach by estimating the privacy elasticity of public-good contributions in a lab experiment.