Price of privacy depends on how you look at it

While people always seem to want what they don’t have, they tend to inflate the value of the things they do have. Economists call this the “endowment effect” once something becomes part of your endowment, you are naturally reluctant to part with it. So you might demand that someone pay you $2,000 for that 1983 Mustang convertible in your garage, even though you’d never pay $2,000 for the car if you were the buyer.

The gap between the buy and sell price you’d set is one reason that house negotiations often go haywire. Homeowners nearly always overestimate what their property is worth or more specifically, what someone else will pay for it. Often, people initially set a price for their home that they wouldn’t pay if they were the buyers.

When discussing cars or homes, the endowment effect is fairly easy to spot. But in the realm of abstract ideas like privacy, things get a bit more complicated.

Still, consideration of this buy-sell gap should be an important part of any serious discussion about privacy, says economist Alessandro Acquisti, a professor at Carnegie Mellon University and a member of the school’s Privacy Technology Center.

{Economists take a look at how people value their privacy. In a recent Ponemon survey, consumers said they should be well compensated when their personal data is leaked. Nearly 70 percent said they should be paid more than $5,000, and 42 percent said more than $10,000, when a company loses their personal information. ~ Dr. Deborah Peel, Patient Privacy Rights}

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