Information Sharing and Privacy in Networks

Abstract

Users of social, economic, or medical networks share personal information in exchange for tangible benefits, but may be harmed by leakage and misuse of the shared information. I analyze the effect of enhancing privacy in the presence of two opposing forces: network effects and informational interdependencies. I show that two privacy enhancements---reducing the likelihood of leakage and decreasing the level of informational interdependence---have opposite effects on the volume of information sharing, and that although they always seem beneficial to non-strategic users, both privacy enhancements may backfire when users are strategic.