Is pay-or-consent for privacy justifiable? Evidence from different users' privacy attitudes toward behavioral data collection in South Korea

Abstract

As regulators began prohibiting online platforms from collecting personal data based on the “take-it-or-leave-it” basis, platform firms must adopt more refined user consent rules such as the pay-or-consent approach. Ensuring sufficient user options could increase the welfare of privacy-sensitive users but reduce the efficiency of data-driven business models. To balance the benefits and costs of enhanced privacy protection, regulators should understand the diversity in users' attitudes toward behavioral data collection in free online platforms. Tradeoffs among privacy, conveniences, and free services based on users' heterogeneous preferences are considered to investigate the user's different privacy attitudes in free online platforms. Three distinct user groups were found: the first one reluctantly accepts the “take-it-or-leave-it” condition because of the lack of alternatives, the second one accepts it for free services, and the third one accepts it because it does not matter. These three user segments constituted 32.9%, 47.0%, and 20.1% of all the respondents, respectively. The pay-or-consent approach can be justifiable in terms of balancing the benefits and costs of the privacy regulations if it properly reflects privacy-sensitive users' willingness to pay for privacy.