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Do Certification Seals Permit a Price Premium for Online Security and Privacy?
Author(s) -
Hammock Michael R.
Publication year - 2011
Publication title -
policy and internet
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.281
H-Index - 26
ISSN - 1944-2866
DOI - 10.2202/1944-2866.1118
Subject(s) - certification , business , price premium , value (mathematics) , internet privacy , consumer privacy , privacy policy , test (biology) , information privacy , computer security , economics , microeconomics , willingness to pay , computer science , management , machine learning , paleontology , biology
Abstract If some consumers care more about online privacy and security than others, and if providing privacy and security imposes opportunity costs on firms, then firms with more privacy and security measures should charge higher prices, and consumers who value these measures should be willing to pay higher prices. To test this hypothesis, data on the prices and certification seals of websites were collected. Examination of the data reveals moderate evidence that firms with a specific kind of security seal enjoy a price premium, and no evidence that sites displaying other seals enjoy a price premium. These findings suggest either that regulation may be unnecessary because markets are correctly pricing security and privacy, or that there is a market failure preventing privacy certification seals from providing credible signals to consumers.