ICT 410 Lecture Notes - Lecture 20: Hyperbolic Discounting, Behavioral Economics
8 Mar 2019
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Three types of transactions when consumers have to make decisions about their privacy. As a byproduct of the service that you"re using. Ex: booking a flight with a travel agent. Provide personal information in exchange for free services. Consumers explicitly decide they will not share information. Despite the high value that internet users place on privacy, they offer their personal information for low compensation. Their behavior does not match their attitude. This phenomenon is called the privacy paradox. There is a difference between having an attitude and your behavior. This behavior has been explained in the literature with different behavioral biases, and in particular hyperbolic discounting. Definition: people value future rewards much less than those that occur immediately. The reward that you receive must be tightly tied to your behavior. If the reward is large but not immediate, then it is not effective. Ex: company trying to get their employees to eat healthier.
