Gaining Trust Through Online Privacy Protection: Self-Regulation, Mandatory Standards, or Caveat Emptor.

Author List: TANG, ZHULEI; Hu, Yu (Jeffrey); Smith, Michael D.;
Journal of Management Information Systems, 2008, Volume 24, Issue 4, Page 153-173.
Trust is particularly important in online markets to facilitate the transfer of sensitive consumer information to online retailers. In electronic markets, various proposals have been made to facilitate these information transfers. We develop analytic models of hidden information to analyze the effectiveness of these regimes to build trust and their efficiency in terms of social welfare. We find that firms' ability to influence consumer beliefs about trust depends on whether firms can send unambiguous signals to consumers regarding their intention of protecting privacy. Ambiguous signals can lead to a breakdown of consumer trust, while the clarity and credibility of the signal under industry self-regulation can lead to enhanced trust and improved social welfare. Our results also indicate that although overarching government regulations can enhance consumer trust, regulation may not be socially optimal in all environments because of lower profit margins for firms and higher prices for consumers.
Keywords: consumer information; consumer surplus; Internet; privacy; social welfare; trust
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#5 0.332 consumer consumers model optimal welfare price market pricing equilibrium surplus different higher results strategy quality cost lower competition firm paper
#239 0.156 privacy information concerns individuals personal disclosure protection concern consumers practices control data private calculus regulation risk individual legislation government sensitive
#172 0.142 trust trusting study online perceived beliefs e-commerce intention trustworthiness relationships benevolence initial importance trust-building examines discussed building future context transactions
#130 0.089 online users active paper using increasingly informational user data internet overall little various understanding empirical despite lead cascades help availability
#30 0.065 market trading markets exchange traders trade transaction financial orders securities significant established number exchanges regulatory structures order traditional stock provides
#7 0.059 detection deception assessment credibility automated fraud fake cues detecting results screening study detect design indicators science important theory performance improved