Transaction costs, privacy, and trust: The laudable goals and ultimate failure of notice and choice to respect privacy online
Kirsten Martin Volume 18, Number 12
2 December 2013Abstract
The goal of this paper is to outline the laudable goals and ultimate failure of notice and choice to respect privacy online and suggest an alternative framework to manage and research privacy. This paper suggests that the online environment is not conducive to rely on explicit agreements to respect privacy. Current privacy concerns online are framed as a temporary market failure resolvable through two options: (a) ameliorating frictions within the current notice and choice governance structure or (b) focusing on brand name and reputation outside the current notice and choice mechanism. The shift from focusing on notice and choice governing simple market exchanges to credible contracting where identity, repeated transactions, and trust govern the information exchange rewards firms who build a reputation around respecting privacy expectations. Importantly for firms, the arguments herein shift the firm's responsibility from adequate notice to identifying and managing the privacy norms and expectations within a specific context.
Contents
Introduction Privacy online, second exchanges, and transaction costs Why notice and choice fails Possible remedies for privacy online Developing a privacy reputation: Privacy in practice Implications for practice and research Conclusion