An Empirical Investigation of The Effects of Discounting on Privacy Related Decisions

Understanding consumer behaviors is a key element to the developing of effective government legislation and marketing techniques. To date, there have been many research efforts to identify the concerns of consumers in terms of their private information, especially within the online environment. Further, there are numerous reports that detail the various methods consumers use to protect their personal information. However, between these two subsets of the privacy literature, there exists a dichotomy within the findings. That is, while many consumers feel strongly about protecting privacy, many do not expend the resources to proactively do so. A recent study was conducted to examine this dichotomy and isolate the factors which have created disparities between consumer stated beliefs and actual behavior. One such factor that was identified to potentially influence decisions is that consumers may discount events over various time horizons in a non-rational way by utilizing a non-exponential discount function. Studies have suggested that a hyperbolic discounting function may capture this behavior. The purpose of this study was then to empirically investigate if hyperbolic discounting behaviors exist among consumers when they consider the tradeoffs between the benefits of immediate protection measures and the long term costs of losing control of personal information. A secondary objective was to investigate whether discounting behavior in privacy related decisions are related to behavior in non-privacy framed choices. The findings of this study were therefore two-fold. First, the notion that privacy related tradeoff decisions follow a hyperbolic pattern could not be rejected. Secondly, no discounting relationships between privacy framed and non-privacy tradeoffs could be identified from the data collected for this dissertation