Beyond the Privacy Paradox: Objective versus Relative Risk in Privacy Decision Making

Eyal Pe’er

Graduate School of Business Administration, Bar-Ilan University, Israel

Thursday, June 9, 2016
4:00 p.m., ICSI Lecture Hall

Privacy decision making has been examined from various perspectives. A dominant “normative” perspective has focused on rational processes by which consumers with stable preferences for privacy weigh the expected benefits of privacy choices against their potential costs. More recently, an alternate “behavioral” perspective has leveraged theories from behavioral decision research to construe privacy decision making as a process in which cognitive heuristics and biases predictably occur. In a series of experiments, we compare the predictive power of these two perspectives by evaluating the impact of changes in objective risk of disclosure and the impact of changes in relative perceptions of risk of disclosure on both hypothetical and actual consumer privacy choices. We find that both relative and objective risks can, in fact, impact consumer privacy decisions. However, and surprisingly, the impact of objective changes in risk diminishes between hypothetical and actual choice settings. Vice versa, the impact of relative risk is more pronounced going from hypothetical to actual choice settings. Our results suggest a way to integrate diverse streams of IS literature on privacy decision making: consumers may both over-estimate their response to normative factors and under-estimate their response to behavioral factors in hypothetical choice contexts relative to actual choice contexts.


Eyal Pe’er is a Senior Lecturer, and the Head of Marketing, at the Graduate School of Business Administration, Bar-Ilan University, Israel. Joined in October 2013 after a two-year post-doctoral fellowship at Carnegie Mellon University (with Fulbright scholarship). Ph.D. (2011) and M.A. (2007) in psychology from Hebrew University of Jerusalem; B.A. (2003) in behavioral sciences from Ruppin Academic Center. I study how choice architecture - the manner by which different options, contingencies or outcomes are presented, framed, designed, ordered or described - impact our everyday choices and decisions. Specifically, the goals of my research are to identify "nudges" that can be used to improve consumers' decisions by helping them choose in manners more consistent with their self-preferences, goals or values, or in manners that promote important societal goals. This includes doing basic research on biases in choice or applied research on improving choice in various domains of consumer behavior including online privacy and security.