An empirical approach to understanding privacy concerns

SSRN Electronic Journal, 2002

This paper explores the demand for privacy that arises from the loss of consumer surplus when firms gain the ability to treat different consumers differently. It is shown that firms in quest of a competitive advantage may have an incentive to acquire consumer information and use it to gain exclusive access to finer consumer segments, even when the costs of customized marketing are exceedingly high. When such is the case, the opportunity arises for an intermediary to coarsen market access in order to protect consumer surplus and to bar firms from exercising price discrimination. This intermediary could be a mass retailer, a mass media or a diverse community. Formally, the paper analyzes the situation of an intermediary who owns a finer market access system, i.e., the capability to separately access two types of consumers who previously remained undistinguishable. The system could be made available to one firm in exclusivity, or to several firms (two instances of "exposure"), or to no firm at all ("privacy"). The best-bidding agent (from among firms, marginal-type consumers, and mainstream-type consumers) is buying the right to command the equilibrium access allocation. The solution involves either privacy (commanded by mainstream consumers) or exclusive exposure (commanded by a firm), depending intuitively on factors such as consumer involvement, homogeneity and adaptability, as well as the size of returns to scale in marketing and the extent of competition.

The current digital marketplace maneuvered by big data lures consumers to disclose information that is private, while they express concern about revealing personal information. The privacy paradox describes the unexpected behavior of people who disclose personal information in spite of being concerned by their privacy. In this paper, we explain the privacy paradox in the data-driven digital marketplace context. We take two related but different routes to expound the privacy paradox. Firstly, using the Theory of Incomplete Information (TII) we argue that, knowledge deficiency of consumers due to incomplete information impedes them to make a rational decision. Secondly, using the Construal Level Theory (CLT) we explain how abstract and psychologically distant privacy values are disparaged over more tangible and psychologically proximal shopping benefits. Our study proposes privacy behavior is not merely an outcome of a trade-off, but a decision process that is influenced by limited knowledge and psychological distance.

Business and Society Review, 1999

A s Americans have been profiled in more and more databases over which they have no control, they have registered increasing concern about their privacy. In 1978, 64% of respondents to a Harris poll were concerned about personal privacy. By 1995, that number had climbed to 82%. 1 And a 1997 survey of 9,300 Internet users found that more than 70% were concerned about privacy. 2 Americans agree with marketing consultant James R. Rosenfield, who has said, "There's too much information under too little control for it not to leak badly at some point, even if marketers have the best of intentions. And lots of marketers, unfortunately, don't." 3 The desire for powerful databases has led marketers to skirt the boundaries of privacy invasion in fields as diverse as medicine, banking, and retail sales. People who call a pharmaceutical manufacturer's 800-number for information about drugs that treat depression or impotence may unwittingly volunteer the raw material for a patient database, which will then be used for targetmarketing campaigns. 4 Couples who detail their financial history on an application for a home mortgage may be surprised to learn that the information they provide will be freely shared with other lending institutions with which they have no prior relationship. 5 And customers who shop with debit and credit cards enable retailers to profile their purchasing patterns for databases that they can exchange with other businesses. 6

Journal of Advertising, 2007

Marketing communications media technologies have the potential to be intrusive and influence consumers' perceptions of marketing communication. Aggressive direct marketing (DM) is one communication tool that has the potential to lead to consumer concern about information privacy. Concerned consumers change their behavior: They refuse to buy through risky channels or provide information, thus jeopardizing the aim of DM. Responsible DM can prevent such reactions and build trust. Typical measures taken and recommended to protect consumers from privacy violations are of a regulative rather than a market-oriented nature, which is directly opposed to companies' profitmaximization aims. We propose a segmentation-based approach for responsible DM, based on consumer heterogeneity regarding privacy concerns and privacy-related behavior. Using two independent samples from South Africa and Australia, we explore consumers' views on privacy issues and examine the potential of a market-oriented approach to responsible DM.

Information Systems Journal, 2015

Existing research on information privacy has mostly relied on the privacy calculus model which views privacy-related decision-making as a rational process where individuals weigh the anticipated risks of disclosing personal data against the potential benefits. In this research, we develop an extension to the privacy calculus model, arguing that the situation-specific assessment of risks and benefits is bounded by pre-existing attitudes or dispositions, such as general privacy concerns or general institutional trust, and (2) limited cognitive resources and heuristic thinking. An experimental study, employing two samples from the U.S. and Switzerland, examined consumer responses to a new smartphone application collecting driving behavior data and provided converging support for these predictions. Specifically, the results revealed that a situation-specific assessment of risks and benefits fully mediates the effect of dispositional factors on information disclosure. In addition, the results also showed that privacy assessment is influenced by momentary affective states, indicating that consumers underestimate the risks of information disclosure when confronted with a user interface that elicits positive affect.

2019

Data is key for the digital economy, underpinning business models and service provision, and a lot of these valuable datasets are personal in nature. Information about individual behaviour is collected regularly by organisations. This information has value to businesses, the government and third parties. It is not clear what value this personal data has to consumers themselves. Much of the digital economy is predicated on people sharing personal data, however if individuals value their privacy, they may choose to withhold this data unless the perceived benefits of sharing outweigh the perceived value of keeping the data private. Further, they might be willing to pay for an otherwise free service if paying allowed them to avoid sharing personal data. We used five evaluation techniques to study preferences for protecting personal data online and found that consumers assign a positive value to keeping a variety of types of personal data private. We show that participants are prepared t...

SSRN Electronic Journal, 2022

For many reasons the current notice and choice privacy framework fails to empower individuals in effectively making their own privacy choices. In this Article we offer evidence from three novel experiments showing that at the core of this failure is a cognitive error. Notice and choice caters to a heuristic that people employ to make privacy decisions. This heuristic is meant to judge trustworthiness in face-to-face-situations. In the online context, it distorts privacy decision-making and leaves potential disclosers vulnerable to exploitation. From our experimental evidence exploring the heuristic’s effect, we conclude that privacy law must become more behaviorally aware. Specifically, privacy law must be redesigned to intervene in the cognitive mechanisms that keep individuals from making better privacy decisions. A behaviorally-aware privacy regime must centralize, standardize and simplify the framework for making privacy choices. To achieve these goals, we propose a master privacy template which requires consumers to define their privacy preferences in advance—doing so avoids presenting the consumer with a concrete counterparty, and this, in turn, prevents them from applying the trust heuristic and reduces many other biases that affect privacy decision-making. Our data show that blocking the heuristic enables consumers to consider relevant privacy cues and be considerate of externalities their privacy decisions cause. The master privacy template provides a much more effective platform for regulation. Through the master template the regulator can set the standard for automated communication between user clients and website interfaces, a facility which we expect to enhance enforcement and competition about privacy terms.

Information Systems: Behavioral & Social Methods eJournal, 2016

Personal data lie at the forefront of different business models and constitute the main source of revenue of several online companies. In many cases, consumers have incomplete information about the digital transactions of their data. This paper investigates whether highlighting positive or negative aspects of online privacy, thereby mitigating the informational problem, can affect consumers’ privacy actions and attitudes. Results of two online survey experiments indicate that participants adopt a more conservative stance on disclosing identifiable information, such as name and email, even when they are informed about positive attitudes of companies towards their privacy. On the other hand, they do not change their attitudes and social actions towards privacy. These findings suggest that privacy concerns are dormant and may manifest when consumers are asked to think about privacy; and that privacy behavior is not necessarily sensitive to exposure to objective threats or benefits of d...

The Cambridge Handbook of Consumer Privacy, Cambridge University Press, 2018

This Review summarizes and draws connections between diverse streams of empirical research on privacy behavior. We use three themes to connect insights from social and behavioral sciences: people's uncertainty about the consequences of privacy-related behaviors and their own preferences over those consequences; the context-dependence of people's concern, or lack thereof, about privacy; and the degree to which privacy concerns are malleable-manipulable by commercial and governmental interests. Organizing our discussion by these themes, we offer observations concerning the role of public policy in the protection of privacy in the information age.

Although marketing managers are relying increasingly on customer data, insight into the best approaches for resolving the personalization-privacy paradox remains limited. Specifically, we argue for the success of a personalization involving the integration of two stages: the self-disclosure stage and the personalization stage. Using a conceptual framework grounded in the foot-in-the-door effect, we argue that compliance with commitment to self-disclosure as the initial small request induces greater compliance with the later target request. The results of a large-scale two-stage field experiment based on a combined propensity score matching and difference-indifference model show positive causal effects of the act of self-disclosure and the positive effect of the intensity of self-disclosure on purchase responses to personalized promotions. The results also indicate that a combination of privacy assurance and personalization declaration drives customers' act of self-disclosure and increases the intensity of self-disclosure. Findings empower managers to capitalize on new opportunities in personalization.