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The Economics of Privacy

Paper Session

Sunday, Jan. 5, 2020 8:00 AM - 10:00 AM (PDT)

Marriott Marquis, Grand Ballroom 12
Hosted By: American Economic Association
  • Chair: Leonardo Bursztyn, University of Chicago

Signaling, Shame, and Silence in Social Learning

Benjamin Golub
,
Harvard University
Arun Chandrasekhar
,
Stanford University
He Yang
,
Harvard University

Abstract

We examine how a social stigma of seeking information can inhibit learning. Consider a Seeker of uncertain ability who can learn about a task from an Advisor. If higher-ability Seekers need information less, then a Seeker concerned about reputation may refrain from asking to avoid signaling low ability. Separately, low-ability individuals may feel inhibited even if their ability is known and there is nothing to signal, an effect we term shame. Signaling and shame constitute an overall stigma of seeking information. We distinguish between the constituent parts of stigma in a simple model and then perform an experiment with treatments designed to detect both effects. Seekers have three days to retrieve information from paired Advisors in a field setting. The first arm varies whether needing information is correlated with ability; the second varies whether a Seeker's ability is revealed to the paired Advisor, irrespective of the seeking decision. We find that low-ability individuals do face large stigma inhibitions: there is a 55% decline in the probability of seeking when the need for information is correlated with cognitive ability. The second arm allows us to assess the contributions of signaling and shame, and, under structural assumptions, to estimate their relative magnitudes. We find signaling to be the dominant force overall. The shame effect is particularly pronounced among socially close pairs (in terms of network distance and caste co-membership) whereas signaling concerns dominate for more distant pairs.

The Salary Taboo: Privacy Norms and the Diffusion of Information

Zoe Cullen
,
Harvard Business School
Ricardo Perez-Truglia
,
University of California-Los Angeles

Abstract

The 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?

James Andreoni
,
University of California-San Diego
Alison Sanchez
,
University of San Diego

Abstract

We 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

Robert Metcalfe
,
Boston University
Dmitry Taubinsky
,
University of California-Berkeley
Luigi Butera
,
University of Chicago

Abstract

A 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.
Discussant(s)
Moritz Meyer-Ter-Vehn
,
University of California-Los Angeles
Bobby Pakzad-Hurson
,
Brown University
Nicolas Bottan
,
Cornell University
Bo Cowgill
,
Columbia University
JEL Classifications
  • D8 - Information, Knowledge, and Uncertainty
  • J3 - Wages, Compensation, and Labor Costs