Keywords

Ellsberg, experiments, identification, maximum likelihood estimation, multiple priors, privacy, subjective expected utility, and uncertainty aversion

Abstract

The alleged privacy paradox states that individuals report high values for personal privacy, while at the same time they report behavior that contradicts a high privacy value. This is a misconception. Reported privacy behaviors are explained by asymmetric subjective beliefs. Beliefs may or may not be uncertain, and non-neutral attitudes towards uncertainty are not necessary to explain behavior. This research was conducted in three related parts. Part one presents an experiment in individual decision making under uncertainty. Ellsberg's canonical two-color choice problem was used to estimate attitudes towards uncertainty. Subjects believed bets on the color ball drawn from Ellsberg's ambiguous urn were equally likely to pay. Estimated attitudes towards uncertainty were insignificant. Subjective expected utility explained subjects' choices better than uncertainty aversion and the uncertain priors model. A second treatment tested Vernon Smith's conjecture that preferences in Ellsberg's problem would be unchanged when the ambiguous lottery is replaced by a compound objective lottery. The use of an objective compound lottery to induce uncertainty did not affect subjects' choices. The second part of this dissertation extended the concept of uncertainty to commodities where quality and accuracy of a quality report were potentially ambiguous. The uncertain priors model is naturally extended to allow for potentially different attitudes towards these two sources of uncertainty, quality and accuracy. As they relate to privacy, quality and accuracy of a quality report are seen as metaphors for online security and consumer trust in e-commerce, respectively. The results of parametric structural tests were mixed. Subjects made choices consistent with neutral attitudes towards uncertainty in both the quality and accuracy domains. However, allowing for uncertainty aversion in the quality domain and not the accuracy domain outperformed the alternative which only allowed for uncertainty aversion in the accuracy domain. Finally, part three integrated a public-goods game and punishment opportunities with the Becker-DeGroot-Marschak mechanism to elicit privacy values, replicating previously reported privacy behaviors. The procedures developed elicited punishment (consequence) beliefs and information confidentiality beliefs in the context of individual privacy decisions. Three contributions are made to the literature. First, by using cash rewards as a mechanism to map actions to consequences, the study eliminated hypothetical bias as a confounding behavioral factor which is pervasive in the privacy literature. Econometric results support the 'privacy paradox' at levels greater than 10 percent. Second, the roles of asymmetric beliefs and attitudes towards uncertainty were identified using parametric structural likelihood methods. Subjects were, in general, uncertainty neutral and believed 'bad' events were more likely to occur when their private information was not confidential. A third contribution is a partial test to determine which uncertain process, loss of privacy or the resolution of consequences, is of primary importance to individual decision-makers. Choices were consistent with uncertainty neutral preferences in both the privacy and consequences domains.

Notes

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Graduation Date

2010

Advisor

Harrison, Glenn

Degree

Doctor of Philosophy (Ph.D.)

College

College of Business Administration

Department

Economics

Degree Program

Economics

Format

application/pdf

Identifier

CFE0003251

URL

http://purl.fcla.edu/fcla/etd/CFE0003251

Language

English

Release Date

July 2011

Length of Campus-only Access

None

Access Status

Doctoral Dissertation (Open Access)

Restricted to the UCF community until July 2011; it will then be open access.

Included in

Economics Commons

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