Ebook The Effect of Online Privacy Information on Purchasing Behavior: An Experimental Study
Most Americans believe that their right to privacy is “under serious threat,” (CBS News, 2005) and express concern about companies collecting their personal data (Harris Interactive, 2001; CBS News, 2005; P&AB, 2005; Turow, et al., 2005). One method the government and industry use to address privacy concerns is to recommend that businesses post privacy policies to convey their privacy practices. However, 70% of people in a recent study disagreed with the statement “privacy policies are easy to understand,” (Turow, et al., 2005) and few people make the effort to read them (Privacy Leadership Initiative, 2001; TRUSTe, 2006). Other studies indicate that people are often willing to provide personal information for small or no rewards (Acquisti and Grossklags, 2005).
This paper reports on research that examines whether the prominent display of privacy information will cause consumers to incorporate this information into their online purchasing decisions. We conducted an online privacy concerns survey to determine the privacy concerns and perceived risks associated with online shopping, and we conducted an experiment in which participants had to make purchase decisions that would directly affect their privacy. We framed the experiment as an online shopping experience at existing (rather than simulated) online merchants, and tested whether signals about the different levels of privacy protection among merchants would affect the participants’ price sensitivity and purchase decisions.
Contrary to the common view that consumers are unlikely to pay for privacy, formed due to the failure of online anonymity services (Brunk, 2002), we found that when privacy information is made more salient, consumers are willing to pay a premium for privacy when purchasing both non-privacy-sensitive and privacy-sensitive items. However, those individuals who were not presented with prominent privacy information were likely to make purchases from the vendor with the lowest price, regardless of that site's privacy policies.
Our study provides evidence of the role of incomplete information on privacy-relevant decision making, and offers new insight on consumers’ valuations of personal data. Survey data indicates that online consumers place greatest importance on knowing what will be done with personal information, and how they can have direct control over their information (Malhotra, et al. 2004). In many instances, consumers have little control over the practices of those collecting their information. Where consumers do have control is in the selection of businesses with whom they share their information, and the type of information provided. Our results indicate that providing privacy information in a clear-cut fashion reduces information asymmetry (the gap between the merchant’s and the consumer’s knowledge of what will happen to the consumer’s data) and the burden on the individual to calculate the risks and benefits of providing their personal information, thus also addressing the problem of bounded rationality.
Download
PDF Ebook The Effect of Online Privacy Information on Purchasing Behavior: An Experimental Study
Posted in :
