This past year, more than 152 security breaches exposed at least 57.7 million Americans to ID theft ( 1 ) and privacy invasions, which suitably makes “privacy” the biggest concern of generic internet population, businesses and governing bodies. The result: legislatures being passed by the government and billions of dollars being invested by businesses to confirm to these legislatures. More than fifty bills were introduced in the first session of the 107th Congress to regulate online privacy, resulting in a national cost of complying to be approximately US$9-36 billion (Hahn 2001). With so much at stake it becomes important to measure not only the economic cost of privacy per person, but also the trade offs (for example convenience and rewards) that lure people to succumb and provide PII to organizations.

A peek into sociological research regarding user behavior clearly indicates that individuals perform a privacy calculus, assessing the cost and benefit of providing information ( 2 ). The calculus depends on factors such as self-ego, environmental stimuli, and interpersonal relationships (Laufer and Wolfe 1977; Stone and Stone 1990).

Studies indicate a huge deficit between the compliance expenditure and the net worth of privacy. This deficit may be owing to limited user awareness and the fact that privacy concerns are usually traded for environmental stimuli such as rewards and convenience.

There has been numerous studies that provide evidence that people compromise personal information for gifts and catalogs (Oberndorf 1999; S. Schwartz 2000). In a survey in 2002 (Jupiter Media Metrix 2002) 82% of the online users reported that they were willing to provide personal information to a new retail organization in exchange for a 100$ drawing. This leads most researchers to believe that compensation or rewards is the biggest factor in a conjoint analysis of factors influencing people to disclose there PII (Milne and Gordon 1993).

A study ( 3 ) done to calculate the dollar cost of privacy and evaluate the factors that influence users to trade their personal information, suggested that convenience is only a minor factor, with monetary reward and privacy protection as the more important ones. It further evaluated that the part-worth of letting users review and edit there personal information is around 2.9 (out of 18) while the part worth of improper access was 3.0. The value of review and editing information is around US$16.40 while that of protection against errors, improper access and secondary use of personal information is worth between US$30.49 and US$44.62. Based on the number of Americans who purchased online (58 million in 2002), it is estimated that the benefit of privacy protection is US$1.77 billion (58 x 30.49 = US$1,768 million), which is at least 5 times and at the max 20 times less than the expenditure i.e. the cost of complying, which was around US$9-36 billion in 2002.

Although this deficit is decreasing through years, the question remains that what could be the cause for this deficit between expenditure and net worth of privacy. I believe user concern is directly proportionate to the awareness and education. Thus, as the user gets more aware and hence more educated about his/her rights and the harm ID theft can cause, this concern is bound to increase (i.e. if nothing is done to alleviate the concerns). Increased awareness, thus could be one probable reason for the decrease in this deficit as compared to 2002. The study might also mean that although most of the surveys indicate increased concern on privacy related issues, most people trade their concerns for rewards or convenience.