Paying to Be Unobservable: Evidence from a Lying Experiment

Te Bao, John Duffy and Nobuyuki Hanaki

ISER Discussion Paper from Institute of Social and Economic Research, The University of Osaka

Abstract: In the digital age, privacy in economic activities is increasingly threatened. In considering policies to address this threat, it is useful to consider what value, if any, people attach to being unobservable—that is, to keeping their economic activities hidden from others. We assess individuals’ willingness to pay (WTP) to be unobservable in a simple coin flipping task that has been used to study lying behavior. We find that more than 90% of student participants submitted a positive WTP with the mean WTP close to 40% of the expected gain from concealment. This magnitude is replicated almost exactly in an additional experiment conducted three years later. The additional experiment separates two reasons why buyers of unobservability misreport more: participants who value unobservability more are also those who would misreport more when unobserved (selection), but having paid for it does not by itself “license” further misreporting. We also find that the observability effect reported in previous studies emerges only when the unobserved

Date: 2024-04, Revised 2026-09
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