Shoppers willing to pay extra for privacy confidence, study finds

Privacy costs extra – and online shoppers are willing to pay a premium to protect their personal information, a new study by Carnegie Mellon University finds.

Study participants who were asked to go on the Web to purchase two items – a package of batteries and a vibrating sex toy – were more likely to buy from sellers with good privacy policies. On average, they were willing to pay about 60 cents extra on a $15 purchase when they were satisfied with the seller’s privacy policy.

Previous studies have found that people willingly give up private information in return for lower prices, but Carnegie Mellon researchers hypothesized that shoppers care about privacy but simply don’t know where to get information on a Web site’s policies.

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Privacy costs extra – and online shoppers are willing to pay a premium to protect their personal information, a new study by Carnegie Mellon University finds.

Study participants who were asked to go on the Web to purchase two items – a package of batteries and a vibrating sex toy – were more likely to buy from sellers with good privacy policies. On average, they were willing to pay about 60 cents extra on a $15 purchase when they were satisfied with the seller’s privacy policy.

Previous studies have found that people willingly give up private information in return for lower prices, but Carnegie Mellon researchers hypothesized that shoppers care about privacy but simply don’t know where to get information on a Web site’s policies.

To test the hypothesis, they had study participants use a shopping search engine called Privacy Finder, which was designed for this study and evaluates the privacy policies of online merchants. Carnegie Mellon also gave the 72 study participants a financial incentive to buy from the cheapest retailers by providing $45 to buy the two items and allowing them to keep the items and leftover money.

“Many people express concerns that unscrupulous online merchants might misuse credit information, target spam to their e-mail addresses or otherwise violate their privacy,” Carnegie Mellon states in a press release. “But a number of previous studies have found that many people still fail to act to protect their privacy online.”

That may be because privacy policies of online retailers are often difficult to access, hard to interpret or may not even exist, study leader Lorrie Cranor, director of the Pittsburgh-based university’s Usable Privacy and Security Lab, says in the release. “Our suspicion was that people care about their privacy, but that it’s often difficult for them to get information about a Web site’s privacy policies,” Cranor says. “People can’t act on information that they don’t have or can’t understand.”

In the study, people who used Privacy Finder bought from sites with high privacy ratings for 50% of battery purchases and one-third of sex toy purchases.

Privacy Finder gives a Web site low marks if it shares personal information with delivery companies that may use a consumer’s information for purposes other than delivery, and if the site shares personal information with other companies that have weak privacy policies.

The study findings will be presented Friday at the Workshop on the Economics of Information Security at Carnegie Mellon.

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