Does Privacy Matter? Evidence from a Legal Reform

Abstract

We investigate the impact of a unique legislative reform that granted anonymity to plaintiffs in court rulings for personal injury claims. Prior to the reform’s implementation in August 2015, claimants who rejected settlement offers faced the risk that court proceedings would publicly disclose sensitive information regarding their health and earnings. By eliminating this source of privacy loss, the reform provides an opportunity to examine how privacy considerations affect outcomes in a real-world setting. Our analysis measures changes in payments for personal injury versus property damage claims (which were not affected by the reform) for car accident cases handled by the major insurance firms in Israel between 2011 and 2020. Using a difference-in-differences framework, we find that the reform led to a 12%–17% increase in payments for personal injury claims. We interpret this estimate as the implicit cost claimants were previously willing to bear, in the form of lower settlements, to avoid the disclosure of private information through court rulings. This result underscores the economic value individuals place on privacy, revealing that concerns about public exposure can significantly influence decision making and negotiation outcomes. Our findings demonstrate the importance of privacy considerations in customer interactions where sensitive information is often involved. This paper was accepted by Dorothea Kübler, behavioral economics and decision analysis. Funding: This work was supported by the Ministry of Justice of Israel [Grant 88/2024], The Falk Institute [Grant 24.03], and the Israel Science Foundation [Grant 1224/24]. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2025.00107 .