Auctioning privacy-sensitive goods: A note on incentive-compatibility

Abstract

One mechanism to obtain valuations of personal data from individuals is the reverse second-price Vickrey auction (RVA), which is assumed to be an incentive-compatible mechanism. Herein, it is analyzed whether conditions for RVA incentive-compatibility exist, once personal data is sensitive and induces privacy costs. In the experiment subjects could sell the result of a logic test together with their name as privacy-sensitive good using an auction mechanism. The winner's identity and result was revealed to the group. The key result is that a significant 'identification effect' exists that acts as auction entry barrier. Thus, the RVA is not an incentive-compatible mechanism for obtaining valuations of privacy-sensitive goods. © 2014 Springer International Publishing Switzerland.