Consumers are prepared to pay more for goods in exchange for more privacy but the difference comes down to pennies rather than pounds.
A lab study sponsored by ENISA, the European Union security agency, confronted participants with a choice of whether to buy identical goods from two online vendors, one of which offered a lower price but wanted personal details such as government-issued ID number and mobile phone number that the other more expensive vendor didn't request.
Where the prices on offer were the same, the lab rats stayed away from the privacy-violating online retailer. However the aversion wasn't strong and a price discount of just €0.50 (£0.42) was enough to tempt consumers into choosing the privacy-invading provider.
The experiment involved 443 people and a choice between two online cinema vendors. The cheaper chain asked users for their mobile number and permission to send them marketing messages via email. Both requested the name, email address and date of birth of prospective buyers. The study was run by researchers at the German Institute for Economic Research (DIW Berlin) and the University of Cambridge.
When prices were the same, the privacy-friendly chain established a market share of 83 per cent. Even when the privacy-busting chain offered bargain prices, a sizeable minority (29 per cent) willingly paid extra to avoid handing over their mobile phone number. This share drops to 9 per cent for those prepared to pay extra to avoid marketing emails.
The survey is one of the few of its type to date. Sören Preibusch, a member of the University of Cambridge team, said the experiment showed that privacy-friendly services were capable of attracting a healthy niche market.
"A sizeable proportion of consumers are willing to pay a higher price for privacy," he writes. "Online businesses can capitalise these concerns. Privacy-friendliness is a win-win for online retailers and their customers."
The lab tests were supplemented by field surveys of 2,300 participants that broadly confirmed the earlier findings.
More details on the study, entitled Monetizing Privacy: An Economic Model for Pricing Personal Information can be found here.
Consumer privacy has hit the headlines over recent weeks with concerns over the lack of transparency over privacy practices employed by many mobile application developers, but the issue is wider than that and also affects web-based services. A post on the Cambridge University's Light Blue Touchpaper blog discussing the experiment in greater depth and discussing the concept of privacy as a currency for web-based services can be found here. ®