Intransitivity of Consumer Preferences for Privacy

Consumers frequently exchange private data about themselves for goods or for money. For example, they provide personal data in online interactions with technology companies, in return for information or other goods. We provide a normative criterion to assess whether companies adequately compensate consumers for their private data in these exchanges. Across a series of eight preregistered experiments, we find that individuals place a higher price on their private data when they sell them for money than when they barter them for goods. In an application of the compatibility principle in cognitive psychology, we also find that this effect occurs because money is a more compatible medium for valuing data than goods are, which increases the weight of the data in monetary valuations, raising the prices that participants demand for their data. This discrepancy in valuations constitutes a violation of procedure invariance and amounts to an intransitivity of participants’ preferences for privacy. Our findings suggest that companies may not be compensating consumers adequately for their data and that the ubiquitous markets for privacy may not function efficiently