Privacy concerns, voluntary disclosure of information, and unraveling: An experiment

• Published in: European economic review Vol. 75; pp. 43 - 59
• Main Authors: Benndorf, Volker, Kübler, Dorothea, Normann, Hans-Theo
• Format: Journal Article
• Language: English
• Published: Amsterdam Elsevier B.V 01.04.2015; Elsevier Sequoia S.A
• Subjects: Data analysis; Disclosure; Economic equilibrium; Economic theory; Information analysis; Information economics; Information revelation; Labor market; Labour market; Labour productivity; Level-k reasoning; Privacy; Productivity; Studies; Workers; Privacy; C91; C90; Information revelation; Level-k reasoning; C72
• ISSN: 0014-2921; 1873-572X
• DOI: 10.1016/j.euroecorev.2015.01.005

We study the voluntary revelation of private information in a labor-market experiment where workers can reveal their productivity at a cost. While rational revelation improves a worker׳s payoff, it imposes a negative externality on others and may trigger further revelation. Such unraveling can be observed frequently in our data although less often than predicted. Equilibrium play is more likely when subjects are predicted to conceal their productivity than when they should reveal. This tendency of under-revelation, especially of low-productivity workers, is consistent with the level-k model. A loaded frame where the private information concerns the workers׳ health status leads to less revelation than a neutral frame. •We experimentally study the voluntary but costly revelation of private information.•Revelation by high-productivity players may trigger more revelation (unraveling).•Experimental data are overall well organized by the Nash equilibria of the game.•Deviations from equilibrium play are in line with level-k reasoning.•A privacy-sensitive contextualized frame leads to less revelation of information.