Contrasting Expert Assessment of Privacy with Perceived Privacy: Implications for Public Policy

The increasing use of the Internet as medium for personal, business and government transactions has ignited the debate on standards and safeguards for protecting privacy of parties involved in the transaction. Since 1995, the government has taken an active role in the form of the Federal Trade Commission’s (FTC) involvement. An expert assessment of issues surrounding privacy on the Internet has helped the FTC to develop a set of five core principles to safeguard consumer’s privacy in online transactions. This research argues that while scientific assessment of privacy issues and the resulting recommendations may serve to allay liability concerns of vendors online, it has limited effects on consumer perceptions of privacy. We examine the factors that firms employ to ensure privacy such as alliances with trusted third parties, policy disclosures, etc. and find that while these factors do indeed affect a consumer’s perception of privacy, their role is significantly moderated by their understanding of technology and influenced by the online vendor’s reputation. Theories from risk management are used to argue that currently there exists a risk communication vacuum between expert assessment of privacy and consumer perceptions thereof. The implication of this work for public policy points toward the need for government and non-profit organizations to bridge this gap through public education initiatives.