Alessandro Acquisti
ABSTRACT
Dichotomies between privacy attitudes and behavior have been noted in the literature but not yet fully explained. We apply lessons from the research on behavioral economics to understand the individual decision making process with respect to privacy in electronic commerce. We show that it is unrealistic to expectindividual rationality in this context. Models of self-control problems and immediate gratification offer more realistic descriptions of the decision process and are more consistent with currently available data. In particular, we show why individuals who may genuinely want to protect their privacy might not do so because of psychological distortions well documented in the behavioral literature; we show that these distortions may affect not only 'naive' individuals but also 'sophisticated' ones; and we prove that this may occur also when individuals perceive the risks from not protecting their privacy as significant.
- A. Acquisti, R. Dingledine, and P. Syverson. On the economics of anonymity. In Financial Cryptography -FC '03, pages 84--102. Springer Verlag, LNCS 2742, 2003.Google Scholar
- A. Acquisti and J. Grossklags. Losses, gains, and hyperbolic discounting: An experimental approach to information security attitudes and behavior. In 2nd Annual Workshop on Economics and Information Security - WEIS '03, 2003.Google Scholar
- A. Acquisti and H. R. Varian. Conditioning prices on purchase history. Technical report, University of California, Berkeley, 2001. Presented at the European Economic Association Conference, Venice, IT, August 2002. http://www.heinz.cmu.edu/acquisti/papers/privacy.pdf. Google ScholarDigital Library
- G. A. Akerlof. The market for 'lemons:' quality uncertainty and the market mechanism. Quarterly Journal of Economics, 84:488--500, 1970.Google ScholarCross Ref
- G. S. Becker and K. M. Murphy. A theory of rational addiction. Journal of Political Economy, 96:675--700, 1988.Google ScholarCross Ref
- B. D. Brunk. Understanding the privacy space. First Monday, 7, 2002. http://firstmonday.org/issues/issue7_10/brunk/index.html.Google Scholar
- G. Calzolari and A. Pavan. Optimal design of privacy policies. Technical report, Gremaq, University of Toulouse, 2001.Google Scholar
- D. Chaum. Untraceable electronic mail, return addresses, and digital pseudonyms. Communications of the ACM, 24(2):84--88, 1981. Google ScholarDigital Library
- D. Chaum. Blind signatures for untraceable payments. In Advances in Cryptology - Crypto '82, pages 199---203. Plenum Press, 1983.Google ScholarCross Ref
- R. K. Chellappa and R. Sin. Personalization versus privacy: An empirical examination of the online consumer's dilemma. In 2002 Informs Meeting, 2002. Google ScholarDigital Library
- F. T. Commission. Privacy online: Fair information practices in the electronic marketplace, 2000. http://www.ftc.gov/reports/privacy2000/ privacy2000.pdf.Google Scholar
- Community Banker Association of Indiana. Identity fraud expected to triple by 2005, 2001. http://www.cbai.org/Newsletter/December2001/identity_fraud_de2001.htm.Google Scholar
- S. Corey. Professional attitudes and actual behavior. Journal of Educational Psychology, 28(1):271--280, 1937.Google ScholarCross Ref
- C. Diaz, S. Seys, J. Claessens, and B. Preneel. Towards measuring anonymity. In P. Syverson and R. Dingledine, editors, Privacy Enhancing Technologies - PET '02. Springer Verlag, 2482, 2002. Google ScholarDigital Library
- ebusinessforum.com. eMarketer: The great online privacy debate, 2000. http://www.ebusinessforum.com/index.asp?doc_id=1785&layout=rich_story.Google Scholar
- Federal Trade Commission. Identity theft heads the ftc's top 10 consumer fraud complaints of 2001, 2002. http://www.ftc.gov/opa/2002/01/idtheft.htm.Google Scholar
- R. Gellman. Privacy, consumers, and costs - How the lack of privacy costs consumers and why business studies of privacy costs are biased and incomplete, 2002. http://www.epic.org/reports/dmfprivacy.html.Google Scholar
- I.-H. Harn, K.-L. Hui, T. S. Lee, and I. P. L. Png. Online information privacy: Measuring the cost-benefit trade-off. In 23rd International Conference on Information Systems, 2002.Google Scholar
- Harris Interactive. First major post-9.11 privacy survey finds consumers demanding companies do more to protect privacy; public wants company privacy policies to be independently verified, 2002. http://www.harrisinteractive.com/news/allnewsbydate.asp?NewsID=429.Google Scholar
- P. Jehiel and A. Lilico. Smoking today and stopping tomorrow: A limited foresight perspective. Technical report, Department of Economics, UCLA, 2002.Google Scholar
- Jupiter Research. Seventy percent of US consumers worry about online privacy, but few take protective action, 2002. http://www.jmm.com/xp/jmm/press/2002/pr_060302.xml.Google Scholar
- H. Kunreuther. Causes of underinsurance against natural disasters. Geneva Papers on Risk and Insurance, 1984.Google ScholarCross Ref
- D. Laibson. Essays on hyperbolic discounting. MIT, Department of Economics, Ph.D. Dissertation, 1994.Google Scholar
- R. LaPiere. Attitudes versus actions. Social Forces, 13:230--237, 1934.Google ScholarCross Ref
- G. Lowenstein, T. O'Donoghue, and M. Rabin. Projection bias in predicting future utility. Technical report, Carnegie Mellon University, Cornell University, and University of California, Berkeley, 2003.Google Scholar
- A. Odlyzko. Privacy, economics, and price discrimination on the Internet. In Fifth International Conference on Electronic Commerce, pages 355--366. ACM, 2003. Google ScholarDigital Library
- T. O'Donoghue and M. Rabin. Choice and procrastination. Quartely Journal of Economics, 116:121---160, 2001. The page referenced in the text refers to the 2000 working paper version.Google ScholarCross Ref
- R. A. Posner. An economic theory of privacy. Regulation, pages 19--26, 1978.Google Scholar
- R. A. Posner. The economics of privacy. American Economic Review, 71(2):405--409, 1981.Google Scholar
- Privacy Rights Clearinghouse. Nowhere to turn: Victims speak out on identity theft, 2000. http://www.privacyrights.org/ar/idtheft2000.htm.Google Scholar
- M. Rabin and T. O'Donoghue. The economics of immediate gratification. Journal of Behavioral Decision Making, 13:233--250, 2000.Google ScholarCross Ref
- A. Serjantov and G. Danezis. Towards an information theoretic metric for anonymity. In P. Syverson and R. Dingledine, editors, Privacy Enhancing Technologies - PET '02. Springer Verlag, LNCS 2482, 2002. Google ScholarDigital Library
- A. Shostack. Paying for privacy: Consumers and infrastructures. In 2nd Annual Workshop on Economics and Information Security - WEIS '03, 2003.Google Scholar
- H. A. Simon. Models of bounded rationality. The MIT Press, Cambridge, MA, 1982.Google Scholar
- P. Slovic. What does it mean to know a cumulative risk? Adolescents' perceptions of short-term and long-term consequences of smoking. Journal of Behavioral Decision Making, 13:259--266, 2000.Google ScholarCross Ref
- S. Spiekermann, J. Grossklags, and B. Berendt. E-privacy in 2nd generation e-commerce: Privacy preferences versus actual behavior. In 3rd ACM Conference on Electronic Commerce - EC '01, pages 38--47, 2002. Google ScholarDigital Library
- G. J. Stigler. An introduction to privacy in economics and politics. Journal of Legal Studies, 9:623--644, 1980.Google ScholarCross Ref
- P. Syverson. The paradoxical value of privacy. In 2nd Annual Workshop on Economics and Information Security - WEIS '03, 2003.Google Scholar
- C. R. Taylor. Private demands and demands for privacy: Dynamic pricing and the market for customer information. Department of Economics, Duke University, Duke Economics Working Paper 02-02, 2002.Google Scholar
- T. Vila, R. Greenstadt, and D. Molnar. Why we can't be bothered to read privacy policies: Models of privacy economics as a lemons market. In 2nd Annual Workshop on Economics and Information Security -WEIS '03, 2003. Google ScholarDigital Library
- S. Warren and L. Brandeis. The right to privacy. Harvard Law Review, 4:193--220, 1890.Google ScholarCross Ref
- N. D. Weinstein. Optimistic biases about personal risks. Science, 24:1232--1233, 1989.Google ScholarCross Ref
- A. Whitten and J. D. Tygar. Why Johnny can't encrypt: A usability evaluation of PGP 5.0. In 8th USENIX Security Symposium, 1999. Google ScholarDigital Library
Index Terms
- Privacy in electronic commerce and the economics of immediate gratification
Recommendations
The Effect of Consumer Privacy Empowerment on Trust and Privacy Concerns in E-Commerce
'eValues'Privacy concerns and a lack of trust have been shown to reduce consumer's willingness to transact with an online vendor. Understandably, firms are searching for methods to reduce consumer privacy concerns and increase trust. In this study, we introduce ...
Understanding and predicting electronic commerce adoption: an extension of the theory of planned behavior
This paper extends Ajzen's (1991) theory of planned behavior (TPB) to explain and predict the process of e-commerce adoption by consumers. The process is captured through two online consumer behaviors: (1) getting information and (2) purchasing a ...
A trust-based consumer decision-making model in electronic commerce: The role of trust, perceived risk, and their antecedents
Are trust and risk important in consumers' electronic commerce purchasing decisions? What are the antecedents of trust and risk in this context? How do trust and risk affect an Internet consumer's purchasing decision? To answer these questions, we i) ...
Comments