The Effect of Knowledge of Online Security Risks on Consumer Decision Making in B2C E-Commerce

This dissertation research studied how different degrees of knowledge of online security risks affect B2C (business-to-consumer) e-commerce consumer decision making. Online information security risks, such as identity theft, have increasingly become a major factor inhibiting the potential growth of e-commerce. On the other hand, e-commerce consumers lack knowledge and awareness of security risks in the online shopping environment and make decisions under conditions where precise probabilities of risks are not available. Based on research in the decision theory field, a person\u27s knowledge of a risk is assumed to fall under one of four states: known certainty, known uncertainty, unknown uncertainty, and unknowable uncertainty. A theoretical model was developed in this study, and based on the model explicit hypotheses were stated which relate a consumer\u27s degree of risk knowledge and the consumer\u27s online security risk evaluation and purchase decision making. This research used an experimental approach to study the effect of different levels of consumers\u27 knowledge of a typical online security risk on their purchase behavior. Following a pilot experiment to test and refine the experimental design, a between-subjects experiment was conducted with the four knowledge states as treatments among 160 subjects. Results indicated that the consumers\u27 willingness to pay to avoid risks and their intention to purchase online vary systematically under different knowledge conditions. Results suggested that people can distinguish between risk and uncertainty and will pay a premium to avoid uncertainty. Specifically, this research suggests that people can judge risky versus ambiguous situations in real-life tasks such as judging the risk in conducting e-commerce transactions. Under ambiguous conditions, people would like to pay more to avoid the ambiguity. This has implications for communicating e-commerce risks to consumers