The proliferation of electronic commerce has facilitated the acquisition, storage and use of consumer data by Internet web sites. Such widespread use of consumer data may promote two types of activities. First, the web sites may use the data to analyse the demographics and preferences of consumers so as to devise better product offers and pricing strategies. Second, the web sites may use the data in other ways (often unanticipated by consumers), such as selling the information to third party organisations or using it for direct marketing solicitations. The extent to which consumers expect each of these activities to occur may determine whether they are willing to take part in online transactions. If consumers are sensitive about their privacy, they may decide to withdraw from online transactions, which could then impede the growth of electronic commerce. It is important to analyse the decisions of consumers and devise proper web site design and data solicitation procedures so that consumers may enjoy a comfortable transaction environment.

Past research on privacy and use of consumer information can broadly be classified into two groups. The first group, primarily contributed by economists, considers how the sharing of consumer information affects transaction and hence social efficiency, but it largely ignores the annoyance and social costs of privacy invasions. The second group of research is contributed by behavioural psychologists and policy researchers, and it focuses on individuals’ concerns about various information practices of firms, and how best to address these concerns. This stream of work, however, ignores the benefits of sharing consumer information, and it fails to take into account the primary motivations of consumers to enter into online transactions.

In our research, we aim to provide a holistic view of information privacy and the decision of consumers to disclose their information to Internet web sites. Our research spans three main areas:

Motivations of Information Disclosure

At the individual level, we conceptualise the primary motivations that lead consumers to disclose their information, and investigate how Internet web sites could enhance these motivations. In particular, we consider the trade-off between benefits that consumers receive from online transactions and the costs that they pay in terms of information privacy, and empirically examine if motivators or incentives could compensate consumers for their potential loss of privacy. Through a rigorous set of experiments and consumer surveys, we show that consumers can often be motivated to enter into online transactions despite their concerns about privacy. Further, we have found that privacy is indeed tradable, and protective measures such as fair information practices or procedural justice may not be as critical as advocated by previous research.

The knowledge that we acquire through this research can help Internet web sites design optimal bundles of attributes (including proper privacy protections and relevant motivators) to meet the needs of consumers. It also complements previous behavioural research that focuses mostly on privacy concerns by illustrating, through solid empirical evidence, the equally (if not more) important role of motivators in influencing consumer decisions. This emphasis on motivators is especially useful in developing a general theory of information privacy in the future.

Design and Procedural Aspects of Data Collection

Our second area of research focuses on the significance of various contextual and procedural factors, such as presentation of detailed web site information, data collection sequence, or question wording and formats, in shaping the disclosure decision of consumers. It has long been recognised in the marketing literature that consumer preferences are shaped at the point of transaction. Even though consumers may have a priori concerns on information privacy, it is often possible to enhance a transaction and raise consumers’ participation rates by the use of carefully constructed web site stimuli and information collection strategies.

We focus on cost-effective procedural and presentation elements that have wide applicability across Internet businesses. Our preliminary findings are promising. In particular, we have found that question wording and use of default options affect consumers’ willingness to receive future marketing promotions from Internet web sites. Further, consumers tend to provide more personal details when questions are arranged in ascending sequence, and when Internet web sites reveal more information about their own background and practices. Consumers display these tendencies, our findings show, even though they do not cognitively pay attention to design elements.

Our findings open up new avenues and offer practical insights for Internet businesses to improve their information collection practices. They also draw attention to common design elements that are often ignored by online firms (e.g., most Internet web sites ask consumers for sensitive personal data at the beginning of registration, which our findings show may not be desirable).

Solicitation, Intrusion, and Public Policy

This stream of research focuses specifically on the intrusion aspect of privacy (cf. secrecy as in the other two streams above). By developing a stylised economic model, we consider the costs imposed by direct marketers (telephone, television, or email advertisers) on consumers who do not want to receive solicitations, and the benefits for consumers who are interested in the products being promoted. Our results show that under a wide range of conditions, consumers would spend too much effort to avoid marketing, which may actually raise the effectiveness of direct marketers’ promotional efforts, and hence lead to even more solicitations. We have tested some of our theoretical predictions using large-scale empirical data on the donot- call list, a practice which has been implemented in the USA since 2003. Based on the findings, we suggest practical strategies for consumers to handle unsolicited promotions. We also propose public policies that could help internalise the privacy costs imposed by direct marketers on consumers.

Because we adopt a balanced view in designing our research model, we are able to balance the interests of consumers who are neutral toward unsolicited promotions and may make purchases if they see desirable offers, and those who are sensitive to privacy. This is different from prior studies that either ignored privacy costs (as in the economics literature) or benefits of information disclosure (as in the behavioural psychology literature). Our findings could provide useful insights for governments in devising optimal policies that take into account the interests of all consumers in electronic commerce.

The faculty members involved in internet information privacy research are:

• GOH Khim Yong
• HUI Kai Lung 
• PNG Paak Liang, Ivan
• TAN Cheng Yian, Bernard
• TEO Hock Hai
• XU Yunjie