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Understanding situational online information disclosure
as a privacy calculus
ACCEPTED BY JOURNAL OF COMPUTER INFORMATION SYSTEMS
Han Li*
School of Business
Minnesota State University Moorhead
Moorhead, MN 56563
Tel: +1 218 477 4067
Fax: + 218 477 2238
Email: li@mnstate.edu
Rathindra Sarathy
Department of Management Science & Information Systems
Spears School of Business
Oklahoma State University
Stillwater, OK 74075
Tel: +1 405 744 8646
Fax: + 405 744 5180
Email: rathin.sarathy@okstate.edu
Heng Xu
College of Information Sciences and Technology
Penn State University
University Park, PA 16802
Tel: +1 814 867 0469
Fax: + 814 865 6426
Email: hxu@ist.psu.edu
Li, H., Sarathy, R., and Xu, H. (2010). “Understanding Situational Online Information
Disclosure as a Privacy Calculus,” Journal of Computer Information Systems, accepted.
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Understanding situational online information disclosure
as a privacy calculus
ABSTRACT
The effect of situational factors is largely ignored by current studies on
information privacy. This paper theorized and empirically tested how an individual’s
decision-making on information disclosure is driven by competing situational benefits
and risk factors. The results of this study indicate that, in the context of an e-commerce
transaction with an unfamiliar vendor, information disclosure is the result of competing
influences of exchange benefits and two types of privacy beliefs (privacy protection
belief and privacy risk belief). In addition, the effect of monetary rewards is dependent
upon the fairness of information exchange. Monetary rewards could undermine
information disclosure when information collected has low relevance to the purpose of
the e-commerce transaction.
Keywords:
Privacy belief, Information disclosure, Exchange benefits, Fairness of information exchange
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INTRODUCTION
Public opinion polls and academic surveys reveal that consumers are increasingly
concerned about merchants having excessive access to their personal information [45, 47].
Scholars in information systems have examined online privacy issues related to the collection
and use of personal information in many different contexts such as privacy responses to general
online companies [11, 27], online purchasing [48], Internet banking [49], e-government service
[16]. A general understanding from this stream of research is that Internet users with high levels
of privacy concerns would perceive high privacy risk and resist disclosing their personal
information to those online firms [11].
Most privacy studies primarily emphasize general privacy concern, i.e. not specific to a
particular website or online company. While such general privacy concerns have received
attention as a determinant of privacy-related behaviors within the IS field, legal and social
scholars have noted recently that it is important to conceptually and operationally draw a
distinction between general concerns for privacy and situation specific concerns [4, 28, 40].
Bennett [4] indicated that the privacy implications of specific situations or domains can mean
something different to everyone. Malhotra et al. [27, p. 349] also acknowledges such contextual
emphasis and suggests scholars begin to unravel the intricacies of privacy concerns.
Following the call for the contextual emphasis of privacy research, we argue that various
situational factors at a specific level should be investigated to have a better understanding of an
individual’s decision-making on information disclosure. These situational factors include the
type of information to be collected by the vendor, economic benefits, privacy perceptions formed
from interaction with a specific website, among others. In this research, we argue that the effect
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of general privacy concern is very likely to be overridden by various situational factors at a
specific level, i.e. related to a specific online vendor.
Further, drivers of information disclosure should be examined in the context of an
exchange process where consumers make cost-benefit trade-offs to decide whether to exchange
their personal information for economic or non-economic benefits [8]. Individuals are more
likely to disclose personal information if risks could be offset by benefits. Some researchers have
taken an exclusively economic approach in studying factors that entice consumers to disclose
information. They argue that personal information is a commodity that can be clearly priced and
exchanged using monetary rewards [18, 24]. For example, consumers may release their
information to a direct marketing company in exchange for cash.
The pure economic approach to information exchange is arguable in the context of the
conventional e-commerce marketplace for three reasons. First, for a typical e-commerce
transaction in the conventional e-commerce marketplace, the information exchange acts as a by-
product of a primary exchange of goods or services for money or other goods and is referred as
“second exchange” [8]. The successful completion of an ecommerce transaction often requires
some consumer information to validate the identity of the consumer and allow normal business
operations such as product delivery, customization, etc. Therefore, consumer information is an
essential enabler of ecommerce transactions, rather than being a commodity exchangeable with
money. Second, in the conventional e-commerce marketplace, monetary rewards such as
discounts or coupons when offered are usually meant to attract online shoppers to complete the
exchange for products or services, and not purely to lure consumers to disclose their personal
information. Current literature has examined monetary rewards as an explicit enticer of
information disclosure outside the context of conventional marketplace and concluded that such
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rewards increase consumers’ willingness to disclose personal information [18, 21]. It is not clear
whether the role of monetary awards stays the same in a conventional marketplace as that in a
non-conventional marketplace. Third, the information exchange in conventional marketplace is
governed by a social contract in which personal information cannot be clearly priced.
Consumers “do not view their personal data in the context of an economic exchange” [19]. A
social contract involves an implicit assessment of exchange fairness, i.e. the degree of fairness of
information exchange involving whether their personal information is collected fairly and, will
subsequently be used fairly [7, 8]. The perceived fairness of the information exchange can
modify the cost-benefit tradeoff analysis, i.e. privacy calculus.
The objective of this study is to investigate situational motivators at a specific level that
entice online consumers to disclose personal information to unfamiliar online vendors in a
conventional e-commerce marketplace and how fairness elements could influence the cost-
benefit tradeoff analysis. In particular, our research questions are: 1) How does the perceived
fairness of information exchange adjust the cost-benefit tradeoff analysis? 2) What is the impact
of monetary rewards associated with primary exchange on information disclosure? 3) How does
perceived fairness of information exchange adjust the impact of monetary rewards?
THEORETICAL FOUNDATION
Online shoppers’ privacy behavior follows a “calculus of behavior” [25], influenced
jointly by competing benefit and cost factors. One factor may override the effect of another. For
example, the urgent need for a spare appliance part (usefulness of the product) may overcome the
fear of privacy risks, especially when there are a limited number of vendor choices. Further,
information exchange is governed by a social contract or shared implicit norms about exchange
fairness. Exchange fairness is likely to adjust the pattern of competing relationships among