Designing Consent: Choice Architecture and Consumer Welfare in Data Sharing

Chiara Farronato, Andrey Fradkin and Tesary Lin

No 34025, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study the welfare consequences of choice architecture for online privacy using a field experiment that randomizes cookie consent banners. We study three ways in which firms or policymakers can influence choices: (1) nudging users through banner design to encourage acceptance of cookie tracking; (2) setting defaults when users dismiss banners; and (3) implementing consent decisions at the website versus browser level. Absent design manipulation, users accept all cookies more than half of the time. Placing cookie options behind extra clicks strongly influences choices, shifting users toward more easily accessible alternatives. Many users dismiss banners without making an explicit choice, underscoring the importance of default settings. Survey evidence further reveals substantial confusion about default settings. Using a structural model, we find that among consent policies requiring site-specific decisions, consumer surplus is maximized when consent interfaces clearly display all options and default to acceptance in the absence of an explicit choice. However, the welfare gains from optimizing banner design are much smaller than those from adopting browser-level consent, which eliminates the time costs of repeated decisions.

JEL-codes: C93 D18 D83 D91 K20 L51 L86 (search for similar items in EconPapers)
Date: 2025-07
New Economics Papers: this item is included in nep-dcm, nep-exp and nep-nud
Note: PR
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