Consumers’ Privacy Concerns are Relative and Malleable: Implications for Online Behavioral Advertising

Behavioral and targeted advertising promises significant gains for firms and reduce search costs and better meet consumer needs (Chen & Stallaert 2010; George & Hogendorn 2012; Yan et al. 2009). The adoption and effectiveness of such approaches, however, has been hampered by consumer privacy concerns (Acquisti & Varian 2006; Goldfarb & Tucker 2011; Tucker 2011). To address these concerns while allowing for marketing innovations, policy makers, with general consensus from industry, have advocated increased transparency of firm data practices and more consumer control over how their personal information is used and shared (FTC 2012; Santalesa 2012; White House 2012). However, the landscape for behavioral advertising is constantly shifting including changes in protection afforded to consumers and an increasingly complex set of choices for consumers to navigate. In this paper we argue, and provide supporting evidence, that this shifting landscape has the potential to limit the effectiveness of these policy approaches intended to address consumers’ privacy concerns. Specifically, we evaluate the impact of reference dependence (Kahneman & Tversky 1979) on the consistency of consumer privacy decision making: both in terms of disclosure and choice of privacy settings.