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Self-Regulation and Competition in Privacy Policies

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  • Florencia Marotta-Wurgler

Abstract

I investigate alternative explanations for the content of privacy policies. Under one model of self-regulation, firms signal their privacy protections to consumers by highlighting compliance with third-party guidelines. However, in a sample of 249 policies, only 27 percent claim compliance with a specific guideline, and the policies that do claim compliance with at least one guideline are generally inconsistent with its requirements. Alternatively, under a market-based mechanism, firms incorporate consumers' preferences directly. Consistent with this influence, there are several intuitive differences in terms across markets. Adult sites--none of which claim certification--are much more likely to give concise and clear notice of privacy practices and limit data sharing with third parties, while cloud-computing sites are particularly likely to follow stringent data security standards. Overall, privacy policy content appears to be shaped at least as much by market forces as by a self-regulatory regime based on external guidelines.

Suggested Citation

  • Florencia Marotta-Wurgler, 2016. "Self-Regulation and Competition in Privacy Policies," The Journal of Legal Studies, University of Chicago Press, vol. 45(S2), pages 13-39.
    • Handle: RePEc:ucp:jlstud:doi:10.1086/689753
    DOI: 10.1086/689753
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    References listed on IDEAS

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    1. Mary J. Culnan & Pamela K. Armstrong, 1999. "Information Privacy Concerns, Procedural Fairness, and Impersonal Trust: An Empirical Investigation," Organization Science, INFORMS, vol. 10(1), pages 104-115, February.
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    Cited by:

    1. Hemant K. Bhargava & Olivier Rubel & Elizabeth J. Altman & Ramnik Arora & Jörn Boehnke & Kaitlin Daniels & Timothy Derdenger & Bryan Kirschner & Darin LaFramboise & Pantelis Loupos & Geoffrey Parker &, 2020. "Platform data strategy," Marketing Letters, Springer, vol. 31(4), pages 323-334, December.
    2. Omri Ben-Shahar & Lior Jacob Strahilevitz, 2016. "Contracting over Privacy: Introduction," The Journal of Legal Studies, University of Chicago Press, vol. 45(S2), pages 1-11.
    3. Athey, Susan & Catalini, Christian & Tucker, Catherin E., 2017. "The Digital Privacy Paradox: Small Money, Small Costs, Small Talk," Research Papers 3498, Stanford University, Graduate School of Business.

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