Trading Returns for Privacy: Experimental Evidence from Financial Data Leaks

This paper provides benchmark experimental evidence on how individuals trade off financial performance against the risk of disclosing their own financial information when privacy risks are explicit, and outcomes are immediate. In a laboratory investment task with repeated decisions, participants choose between two risky options that differ in expected return and in an explicitly stated probability that choosing one option triggers a pseudonymous disclosure of a limited subset of their pre-elicited financial information to other participants. Participants respond systematically to both return spreads and leak probabilities, but choices are substantially more elastic to financial incentives than to changes in leak risk. In dynamic analyses, experiencing an own leak has modest and short-lived effects, whereas higher leakage among other participants is followed by a lower propensity to select the privacy-risky option. Standard measures of risk and loss aversion and most economic characteristics explain little of the heterogeneity in choices, while context-relevant privacy attitudes are associated with more privacy-protective behavior. Overall, in this transparent-probability benchmark environment, monetary incentives dominate leak risk on average, while social information about others' leaks meaningfully shapes behavior.