Privacy Elasticity: A (Hopefully) Useful New Concept

Privacy considerations and their effects on behavior are becoming increasingly important. Yet the extremes of full and no privacy are rarely an option. How much does behavior change with small changes in privacy? Dekel et al. (2023) introduce the concept of privacy elasticity, the responsiveness of economic variables to small changes in privacy protections. This concept combines elasticity—a key economic measure of responsiveness of one variable to changes in another—and differential privacy—a computer science theory emerging as the standard tool for protecting and quantifying privacy. Together, they create a measure of privacy elasticity that is portable and comparable across contexts. The applicability of this concept is demonstrated by reviewing how privacy elasticity can be estimated in a public-good lab experiment.