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An empirical approach to understanding privacy concerns

Author

Listed:
  • Luc Wathieu

    (ESMT European School of Management and Technology)

  • Allan Friedman

    (John F. Kennedy School, Harvard University)

Abstract

This paper shows that privacy concerns in commercial contexts are not solely driven by a desire to control the transmission of personal information or to avoid intrusive direct marketing campaigns. When they express privacy concerns, consumers anticipate indirect economic consequences of data use, such as price discrimination. Our general hypothesis is that consumers are capable of expressing differentiated levels of concerns in the presence of changes that suggest indirect consequences of information transmission. We suggest that there is a homo economicus behind privacy concerns, not simply a primal fear. This hypothesis is tested in a large-scale experiment evoking the context of affinitybased direct marketing of insurances, which relies on data transmitted by alumni associations. Because opt-in and opt-out choices offered by firms to consumers usually capture non-situational preferences about data transmission, their ability to enact privacy concerns is questioned by our findings.

Suggested Citation

  • Luc Wathieu & Allan Friedman, 2009. "An empirical approach to understanding privacy concerns," ESMT Research Working Papers ESMT-09-001, ESMT European School of Management and Technology, revised 14 Jan 2009.
  • Handle: RePEc:esm:wpaper:esmt-09-001
    as

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    File URL: http://static.esmt.org/publications/workingpapers/ESMT-09-001.pdf
    File Function: First version, 2009
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    References listed on IDEAS

    as
    1. Curtis R. Taylor, 2004. "Consumer Privacy and the Market for Customer Information," RAND Journal of Economics, The RAND Corporation, vol. 35(4), pages 631-650, Winter.
    2. Benjamin Hermalin & Michael Katz, 2006. "Privacy, property rights and efficiency: The economics of privacy as secrecy," Quantitative Marketing and Economics (QME), Springer, vol. 4(3), pages 209-239, September.
    3. repec:spr:infosf:v:8:y:2006:i:5:d:10.1007_s10796-006-9013-4 is not listed on IDEAS
    4. Il-Horn Hann & Kai-Lung Hui & Sang-Yong T. Lee & Ivan P. L. Png, 2008. "Consumer Privacy and Marketing Avoidance: A Static Model," Management Science, INFORMS, vol. 54(6), pages 1094-1103, June.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    privacy; opt-in/opt-out; insurance;

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • M38 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Government Policy and Regulation

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