Data Privacy and the Endowment Effect

The endowment effect is a psychological phenomenon in which people overvalue the things they own as compared to equivalent things they do not own. For example, a person given a mug and then offered the chance to trade it for equally valued pens will typically demand twice the value in pens than they would have been willing to pay to acquire the mug in the first place. In other words, a thing that is “yours” has more value than the thing in the abstract.

Turns out the endowment effect is on steroids in the data privacy realm:

Do consumers value data privacy? How much? In a survey of 2,416 Americans, we find that the median consumer is willing to pay just $5 per month to maintain data privacy (along specified dimensions), but would demand $80 to allow access to personal data. This is a “superendowment effect,” much higher than the 1:2 ratio often found between willingness to pay and willingness to accept.

How Much Is Data Privacy Worth? A Preliminary Investigation

The researchers conclude that “policymakers should give little or no attention” to these economic measures of value because willingness to pay and willingness to accept are “highly unreliable guides to the welfare effects of retaining or giving up data privacy.”

Maybe it’s because people have been told data privacy is a major issue, but they actually haven’t seen any real-world impact on their lives.