CFI | Paper Highlight
The Digital Privacy Paradox and Choice Architecture: Evidence from an Experiment in Fintech
From Susan Athey, Christian Catalini, Alex Moehring and Catherine Tucker
“Notice and choice” is a mainstay of policies designed to safeguard consumer privacy. This paper investigates distortions in consumer behavior when faced with notice and choice, which may limit the ability of consumers to safeguard their privacy. We used data derived from a field experiment at MIT that distributed a new product, Bitcoin, to all 4,494 undergraduate students. There are two primary findings. First, small navigation costs have a tangible effect on how privacy-protective consumers’ choices are, often in sharp contrast with individual stated preferences about privacy. Second, the introduction of irrelevant but reassuring information about privacy protection makes consumers less likely to avoid surveillance, regardless of their stated preferences toward privacy.
Learn More about FinTech
Current FinTech projects from the Consumer Finance Initiative cover topics including Target Date Funds, privacy, banking interest rates and lending practices, and investment portfolio choices. Find more FinTech research here.