Abstract

Consumers face frequent and consecutive digital privacy choices, but each choice is not necessarily independent. This paper demonstrates that past privacy choices affect consumers’ current privacy choices. Such state-dependent choices suggest that privacy choices can have externalities within a platform in which one app's data requests can affect the ability of other apps to collect data. Specifically, I use an individual-level consumer panel to investigate data consent decisions by consumers on Alipay, a major digital platform that connects users and third-party apps. Leveraging a natural experiment that encourages users to accept data requests, I find that the probability of rejecting the next request declines 15%. This effect decays over time; it is larger when preferences for the app at that moment are relatively weak, as categorized by large language models (LLMs); and for users whose privacy preferences are relatively weak. The effect does not differ by whether the specific data requested in consecutive data consent decisions is the same. Overall, these results suggest that the externalities arising from state-dependent data consent choices are temporary. Nevertheless, this temporary effect incentivizes platforms to encourage apps to provide consumer-friendly data request designs. 

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