The Economics of Privacy
Sunday, Jan. 5, 2020 8:00 AM - 10:00 AM (PDT)
- Chair: Leonardo Bursztyn, University of Chicago
The Salary Taboo: Privacy Norms and the Diffusion of Information
AbstractThe diffusion of salary information has important implications for labor markets, such as wage discrimination policies and collective bargaining. Despite the widespread view that transmission of salary information is imperfect and unequal, there is little direct evidence on the magnitude and sources of these frictions. We conduct a field experiment with 755 employees at a multibillion-dollar corporation to study how people search for and share salary information. We show that most employees have inaccurate beliefs about the average salary of their peers. We provide evidence that such misperceptions arise, in part, due to search costs, and we provide suggestive evidence that these costs are associated with privacy norms. Last, we show that, contrary to widespread belief, there are no significant gender differences in misperceptions, search costs, and privacy norms.
Fooling Myself or Fooling Observers?
AbstractWe present a novel experiment demonstrating strategies selfish individuals utilize to avoid social pressure to be altruistic. Subjects participate in a trust game, after which they have an opportunity to state their beliefs about their opponent's actions. Subsequently, subjects participate in a task designed to “reveal” their true beliefs. Subjects who initially made selfish choices falsely state their beliefs about their opponent's kindness. Their “revealed” beliefs were significantly more accurate, which exposed subjects' knowledge that their selfishness was unjustifiable by their opponent's behavior. The initial false statements complied with social norms, suggesting subjects' attempts to project a more favorable social image.
The Deadweight Loss of Social Recognition
AbstractA growing body of empirical work shows that social recognition of individuals' behavior can meaningfully influence individuals’ choices. This paper studies whether social recognition is a socially efficient lever for influencing individuals’ choices. Because social recognition generates utility from esteem to some but disutility from shame to others, it can be either positive-sum, zero-sum, or negative-sum. This depends on whether the social recognition utility function is convex, linear, or concave, respectively. We develop a new revealed preferences methodology to investigate this question, which we deploy in a field experiment on promoting attendance to the YMCA of the Triangle Area. We find that social recognition increases YMCA attendance by 17-23% over a one-month period in our experiment, and our estimated structural models predict that it would increase attendance by 19-23% if it were applied to the whole YMCA of the Triangle Area population. However, we find that the social recognition utility function is significantly concave and thus generates deadweight loss. If our social recognition intervention were applied to the whole YMCA of the Triangle Area population, we estimate that it would generate deadweight loss of $1.23-$2.15 per dollar of behaviorally-equivalent financial incentives.
- D8 - Information, Knowledge, and Uncertainty
- J3 - Wages, Compensation, and Labor Costs