A Theory of Pricing Private Data

Abstract

Personal data has value to both its owner and to institutions who would like to analyze it. Privacy mechanisms protect the owner's data while releasing to analysts noisy versions of aggregate query results. But such strict protections of the individual's data have not yet found wide use in practice. Instead, Internet companies, for example, commonly provide free services in return for valuable sensitive information from users, which they exploit and sometimes sell to third parties. As awareness of the value of personal data increases, so has the drive to compensate the end-user for her private information. The idea of monetizing private data can improve over the narrower view of hiding private data, since it empowers individuals to control their data through financial means. In this article we propose a theoretical framework for assigning prices to noisy query answers as a function of their accuracy, and for dividing the price amongst data owners who deserve compensation for their loss of privacy. Our framework adopts and extends key principles from both differential privacy and query pricing in data markets. We identify essential properties of the pricing function and micropayments, and characterize valid solutions.