Privacy concerns significantly impact AI adoption, yet little is known about how information environments shape user responses to data leak threats. We conducted a 2 × 3 between-subjects experiment (N = 610) examining how risk versus ambiguity about privacy leaks affects the adoption of AI personalization. Participants chose between standard and AI-personalized product baskets, with personalization requiring data sharing that could leak to pricing algorithms. Under risk (30% leak probability), we found no difference in AI adoption between privacy-threatening and neutral conditions (ca. 50% adoption). Under ambiguity (10-50% range), privacy threats significantly reduced adoption compared to neutral conditions. This effect holds for sensitive demographic data as well as anonymized preference data. Users systematically over-bid for privacy disclosure labels, suggesting strong demand for transparency institutions. Notably, privacy leak threats did not affect subsequent bargaining behavior with algorithms. Our findings indicate that ambiguity over data leaks, rather than only privacy preferences per se, drives avoidance behavior among users towards personalized AI.

Large language models (LLMs) increasingly support heterogeneous tasks within a single interface, requiring users to form, update, and act upon beliefs about one system across domains with different reliability profiles. Understanding how such beliefs transfer across tasks and shape delegation is therefore critical for the design of multipurpose AI systems. We report a preregistered experiment (N = 240, 7,200 trials) in which participants interacted with a controlled AI simulation across grammar checking, travel planning, and visual question answering, each with fixed, domain-typical accuracy levels. Delegation was operationalized as a binary reliance decision - accepting the AI's output versus acting independently and belief dynamics were evaluated against Bayesian benchmarks. We find three main results. First, participants do not reset beliefs between tasks: priors in a new task depend on posteriors from the previous task, with a 10-point increase predicting a 3-4 point higher subsequent prior. Second, within tasks, belief updating follows the Bayesian direction but is substantially conservative, proceeding at roughly half the normative Bayesian rate. Third, delegation is driven primarily by subjective beliefs about AI accuracy rather than self-confidence, though confidence independently reduces reliance when beliefs are held constant. Together, these findings show that users form global, path-dependent expectations about multipurpose AI systems, update them conservatively, and rely on AI primarily based on subjective beliefs rather than objective performance. We discuss implications for expectation calibration, reliance design, and the risks of belief spillovers in deployed LLM-based interfaces.

AI consumer markets are characterized by severe buyer-supplier market asymmetries. Complex AI systems can appear highly accurate while making costly errors or embedding hidden defects. While there have been regulatory efforts surrounding different forms of disclosure, large information gaps remain. This paper provides the first experimental evidence on the important role of information asymmetries and disclosure designs in shaping user adoption of AI systems. We systematically vary the density of low-quality AI systems and the depth of disclosure requirements in a simulated AI product market to gauge how people react to the risk of accidentally relying on a low-quality AI system. Then, we compare participants' choices to a rational Bayesian model, analyzing the degree to which partial information disclosure can improve AI adoption. Our results underscore the deleterious effects of information asymmetries on AI adoption, but also highlight the potential of partial disclosure designs to improve the overall efficiency of human decision-making.