Abstract
The importance of personal privacy to Internet users has been extensively researched using a variety of survey techniques. The limitations of survey research are well-known and exist in part because there are no positive or negative consequences to responses provided by survey participants. Such limitations are the motivation for this work. Experimental economics is widely accepted by economists and others as an investigative technique that can provide measures of economic choice-making that are substantially more accurate than those provided by surveys. This paper describes our efforts at applying the techniques of experimental economics to provide a foundation for (a) estimating the values that consumers place on privacy and various forms of security (encryption, HIPAA, etc.) and for (b) quantifying user responses to changes in the Internet environment. The contribution of this study is a better understanding of individual decision-making in the context of benefits and costs of making private information available to Internet sites. Preliminary results from a series of pilot studies are consistent with optimizing behaviors, indicating that continued application of experimental economics techniques in the quantification of Internet user actions in privacy/security space will be illuminating. Our results show that Internet users place great value on security measures, both regulatory and technical, that make identity theft much less likely. Our Web-based experiments indicate that privacy- and security- enhancing protections are likely to be subject to moral hazard responses, as participants in our online experiments became more aggressive in their Internet usage with greater protection in place.
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Notes
A website describing the Iowa Electronic Markets states that, “The Iowa Electronic Markets are real-money futures markets in which contract payoffs depend on economic and political events such as elections,” available at: http://www.biz.uiowa.edu/iem/.
The Privacy Place™ contains an extensive collection of published works, by the authors and others, about Internet user privacy and security http://theprivacyplace.org/).
This statement is made after searching both the information technology (IT) and experimental economic literature.
26 USCS Section 9802 (2004).
In the pilot experiment we assumed that equilibrium was achieved after five iterations.
There are certainly some studies that suggest there are negative externalities associated with “adult” websites, especially those that appeal to pedophiles.
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Acknowledgment
The authors would like to thank the College of Management at North Carolina State University for funding for software development and IBM for financial support that allowed real rewards to accompany more successful optimizing decisions by experiment participants.
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Revised for: Information Systems Frontiers, Special Issue on the Economic Aspects of Information Security.
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Poindexter, J.C., Earp, J.B. & Baumer, D.L. An experimental economics approach toward quantifying online privacy choices. Inf Syst Front 8, 363–374 (2006). https://doi.org/10.1007/s10796-006-9013-4
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DOI: https://doi.org/10.1007/s10796-006-9013-4