The impact of free digital offers on individual behavior and its implications for consumer and data protection laws

Two days ago, I received great news! I was awarded a Marie Skłodowska-Curie Fellowship to conduct research on how offers for free digital goods and services influence people’s decision about their personal data and consumer rights. This three-year project will be supervised by Jan Smits. It will include collaboration with researchers from the UM School of Business and Economics and a research stay at ETH Zurich with the Law, Economics, and Business Group led by Alexander Stremitzer.

The idea for this research started with a simple observation that there is an abundance of digital goods and services offered for free. We can communicate with our friends through social networks, store our files in clouds, navigate the city, manage our finances or even find a life partner using mobile applications or online services without paying a single penny.

When looking closer at these offers, it can be, however, noticed that free does not yet mean that we give nothing in exchange. We do provide our private information and attention that might be profitably used by suppliers of free digital content. Since these transactions affect consumers and their personal data, they fall within the scope of two fields of the EU law – data protection and consumer law. The overall objectives of these two areas of law are to protect the privacy of consumers and to balance their position against more powerful transaction partners, i.e., businesses. The question which interests me most is whether these objectives are indeed achieved with the current design of the rules, given people’s heuristics and biases in decision making about free products. Behavioral research has demonstrated that consumers tend to overestimate the benefits and underestimate nonmonetary costs of free digital content in the form of exposure to advertisements. Yet, it is still unknown how free offers influence consumer decisions that are relevant from a legal perspective, i.e., decisions that involve consumer rights and privacy. During my MSCA Fellowship, I will conduct online experiments to address this knowledge gap.

Specifically, I will aim to answer the following research questions:

  1. How does offering digital content at a zero price but in exchange for personal data influence consumers’ decisions about:
    • use of digital content,
    • sharing of personal data,
    • use of contractual and data protection rights, e.g., request to repair the defective content or to delete personal data.
  2. Will these decisions change if consumers are provided with information that:
    • consumer personal data are supplied as counter-performance for free digital content?
    • consumer personal data are valuable?

With the proposed experimental studies, I will provide further insights on consumer behavior by identifying how consumers make decisions regarding free digital content supplied in exchange for personal information. These transactions have been recognized as in need for a policy intervention and have been subject to recent legal initiatives in the EU such as the General Data Protection Regulation or the Digital Content Directive. The stakes are non-trivial. Although consumers do not pay money for free digital products, they do suffer detriment when a product fails to function properly (e.g., costs of time spent on repairment) or due to abuse of personal data they shared in exchange. Crucially, free offers might affect one of the most vulnerable groups of consumers that is low-income consumers who cannot afford paying for digital products. Thus, the overarching goal of this research is to learn whether there is room for improving welfare of consumers of free digital content and what further measures could be implemented to achieve such an improvement.

Since this is my very first post on the MEPLI blog, I would like to take this opportunity to briefly introduce myself to its readers. I am an Assistant Professor of Empirical Legal Research at the UM Faculty of Law. Before coming to Maastricht, I was a post-doctoral fellow and an LLM student at the NYU School of Law. I got into experimental research during my doctoral studies at the Max Planck Institute for Research on Collective Goods in Bonn. There I worked together with economists and psychologists investigating the impact of law on human behavior. For instance, I ran a series of experiments aimed to understand the influence of gender- and performance-based selection procedures on group cooperation (more details here). Based on my own and other empirical research I developed legal arguments contributing to the discussion on introducing gender quotas in corporate boards. I also investigated experimentally how payoff-irrelevant terms (i.e., a fixed-term vs. open-end contract duration) can impact contractual behavior (more details here). When at NYU I expanded my empirical toolkit and  started analyzing the content of contracts governing transactions for free and paid digital content. This helped me generate further research questions that I am going to address as a Marie Skłodowska-Curie Fellow. I will keep you posted about the results of this research project, so stay tuned!