research-article

Adverse selection in online "trust" certifications

Author:

Benjamin EdelmanAuthors Info & Claims

ICEC '09: Proceedings of the 11th International Conference on Electronic Commerce

Pages 205 - 212

https://doi.org/10.1145/1593254.1593286

Published: 12 August 2009 Publication History

Abstract

Widely-used online "trust" authorities issue certifications without substantial verification of recipients' actual trustworthiness. This lax approach gives rise to adverse selection: The sites that seek and obtain trust certifications are actually less trustworthy than others. Using a new dataset on web site safety, I demonstrate that sites certified by the best-known authority, TRUSTe, are more than twice as likely to be untrustworthy as uncertified sites. This difference remains statistically and economically significant when restricted to "complex" commercial sites. In contrast, competing certification system BBBOnline imposes somewhat stricter requirements and appears to provide a certification of positive, albeit limited, value.

References

[1]

Akerlof, George. 1970. "The Market for 'Lemons': Quality Uncertainty and the Market Mechanism." Quarterly Journal of Economics, 84(4), pp. 488--500.

[2]

Backhouse, James, et al. 2005. "A Question of Trust -- An Economic Perspective on Quality Standards in the Certification Services Market." Communications of the ACM.

Digital Library

[3]

Backhouse, James, et al. 2005. "Spotting Lemons in the PKI Market: Engendering Trust by Signaling Quality." Electronic Commerce and the Digital Economy, ed. Michael Shaw. M. E. Sharpe, Inc., Advances in Management Information Systems Series Editor, Vladimir Zwass.

[4]

Baye, Michael, and John Morgan. 2003. "Red Queen Pricing Effects in E-Retail Markets." SSRN Working Paper 655448 (accessed May 8, 2009).

[5]

Boutin, Paul. 2002. "Just How Trusty is Truste?" Wired. April 9, 2002. http://www.wired.com/news/exec/0,51624-0.html (accessed May 8, 2009).

[6]

Chiappori, Pierre-Andre, and Bernard Salanie. 2000. "Testing for Asymmetric Information in Insurance Markets." Journal of Political Economy, 108, pp. 56--78.

[7]

Electronic Frontier Foundation. 1999. Letter to the FTC. Original at http://www.eff.org/pub/Privacy/Email_Internet_Web /19991020_req_to_prtc_com3.html, quoted in relevant part at http://yro.slashdot.org/article.pl?sid=99/11/05/1021214 (accessed May 8, 2009).

[8]

Finkelstein, Amy, and James Poterba. 2004. "Adverse Selection in Insurance Markets: Policyholder Evidence from the U.K. Annuity Market." Journal of Political Economy, 112(1), pp. 183--208.

[9]

FTC. 1999. "Self-Regulation and Privacy Online." FTC. July 1999. http://www.ftc.gov/os/1999/07/privacy99.pdf (accessed May 8, 2009).

[10]

Genesove, David. 1993. "Adverse Selection in the Wholesale Used Car Market." Journal of Political Economy. 101(4), pp. 644--665.

[11]

Greenstadt, Rachel and Michael Smith. 2005. "Protecting Personal Information: Obstacles and Directions" in Proceedings of the Fourth Annual Workshop on Economics and Information Security. Cambridge, Massachusetts.

[12]

Jamal, Karim, Michael Maier, and Shyam Sunder. 2003. "Privacy in E-Commerce: Developing of Reporting Standards, Disclosure, and Assurance Services in an Unregulated Market." Journal of Accounting Research. 41(2), pp. 285--309.

[13]

LaRose, Robert, and Nora Rifon. 2002. "Your Privacy Is Assured -- Of Being Invaded: Web Sites with and without Privacy Seals." http://www.msu.edu/~larose/es2003post.htm (accessed May 8, 2009).

[14]

Microsoft. "Online Privacy Notice Highlights." http://privacy.microsoft.com/ (accessed May 8, 2009).

[15]

Singel, Ryan. 2006. "'Free IPod' Takes Privacy Toll." Wired. March 16, 2006.

[16]

Tang, Zhulei, Yu Hu, and Michael Smith. 2005. "Protecting Online Privacy: Self-Regulation, Mandatory Standards, or Caveat Emptor." Proceedings of the Fourth Annual Workshop on Economics and Information Security. Cambridge, Massachusetts.

[17]

"TRUSTe Case Study - Realty Tracker." TRUSTe. http://www.truste.org/pdf/Realty_Tracker_Case_Study.pdf (accessed May 8, 2009).

[18]

"TRUSTe Fact Sheet." http://www.truste.org/about/fact_sheet.php (accessed May 8, 2009).

[19]

"TRUSTe Program Requirements." http://www.truste.org/requirements.php (accessed May 8, 2009).

[20]

"TRUSTe Watchdog Reports." https://www.truste.org/consumers/watchdog_reports.php (accessed May 8, 2009).

[21]

Villeneuve, Bertrand. 2003. "Mandatory Pensions and the Intensity of Adverse Selection in Life Insurance Markets." The Journal of Risk and Insurance. 70(3), pp. 527--548.

Cited By

Rao AUrsu R(2023)The Impact of Voluntary LabelingSSRN Electronic Journal10.2139/ssrn.4476545Online publication date: 2023
https://doi.org/10.2139/ssrn.4476545
Barth SIonita DHartel P(2022)Understanding Online Privacy—A Systematic Review of Privacy Visualizations and Privacy by Design GuidelinesACM Computing Surveys10.1145/350228855:3(1-37)Online publication date: 3-Feb-2022
https://dl.acm.org/doi/10.1145/3502288
Chipidza WLeidner DBurleson D(2016)Why Companies Change Privacy PoliciesProceedings of the 2016 49th Hawaii International Conference on System Sciences (HICSS)10.1109/HICSS.2016.601(4849-4858)Online publication date: 5-Jan-2016
https://dl.acm.org/doi/10.1109/HICSS.2016.601
Show More Cited By

Index Terms

Adverse selection in online "trust" certifications
1. Social and professional topics
  1. Computing / technology policy
    1. Government technology policy
      1. Governmental regulations

Recommendations

Adverse selection in online "trust" certifications and search results

Widely-used online ''trust'' authorities issue certifications without substantial verification of recipients' actual trustworthiness. This lax approach gives rise to adverse selection: the sites that seek and obtain trust certifications are actually ...
Determinants of repurchase intention in online group-buying

A theoretical model integrating the D&M model and trust literature was proposed.The model was tested using data collected customers of a group-buying website.Increasing satisfaction and perceived quality will facilitate repurchase intention.Increasing ...
The Role of Reputation on Trust and Loyalty: A Cross-Cultural Analysis of Tablet E-Tailing

The purpose of this article is to empirically examine the role of online retailer's website reputation on tablet commerce and to compare the trust arbitration between reputation and loyalty in two cultures-Finland and Nigeria. Data was collected from ...

Comments

Information & Contributors

Information

Published In

cover image ACM Other conferences

ICEC '09: Proceedings of the 11th International Conference on Electronic Commerce

August 2009

407 pages

ISBN:9781605585864

DOI:10.1145/1593254

Conference Chairs:
Patrick Y. K. Chau
The University of Hong Kong, Hong Kong
,
Kalle Lyytinen
Case Western Reserve University, USA
,
Chih-Ping Wei
National Tsing Hua University, Taiwan
,
Program Chairs:
Christopher C. Yang
Drexel University, USA
,
Fu-Ren Lin
National Tsing Hua University, Taiwan

Copyright © 2009 ACM.

Permission to make digital or hard copies of all or part of this work for personal or classroom use is granted without fee provided that copies are not made or distributed for profit or commercial advantage and that copies bear this notice and the full citation on the first page. Copyrights for components of this work owned by others than ACM must be honored. Abstracting with credit is permitted. To copy otherwise, or republish, to post on servers or to redistribute to lists, requires prior specific permission and/or a fee. Request permissions from [email protected]

Sponsors

School of Business, The University of Hong Kong, Hong Kong
Sayling Wen Cultural & Educational Foundation
Ministry of Education, Taiwan
College of Information Science and Technology, Drexel University, USA
Weatherhead School of Management, Case Western Reserve University, USA
College of Technology Management, National Tsing Hua University, Taiwan
National Science Council, Taiwan
Chinese Enterprise Resource Planning Society, Taiwan
International Center for Electronic Commerce, Korea Advanced Institute of Science & Technology, Korea

Publisher

Association for Computing Machinery

New York, NY, United States

Publication History

Published: 12 August 2009

Permissions

Request permissions for this article.

Request Permissions

Check for updates

Author Tags

Qualifiers

Research-article

Conference

ICEC '09

Sponsor:

ICEC '09: International Conference on E-Commerce

August 12 - 15, 2009

Taipei, Taiwan

Acceptance Rates

Overall Acceptance Rate 150 of 244 submissions, 61%

Contributors

Other Metrics

View Article Metrics

Bibliometrics & Citations

Bibliometrics

Article Metrics

21
Total Citations
View Citations
328
Total Downloads

Downloads (Last 12 months)22
Downloads (Last 6 weeks)1

Reflects downloads up to 02 Sep 2024

Other Metrics

View Author Metrics

Citations

Cited By

Rao AUrsu R(2023)The Impact of Voluntary LabelingSSRN Electronic Journal10.2139/ssrn.4476545Online publication date: 2023
https://doi.org/10.2139/ssrn.4476545
Barth SIonita DHartel P(2022)Understanding Online Privacy—A Systematic Review of Privacy Visualizations and Privacy by Design GuidelinesACM Computing Surveys10.1145/350228855:3(1-37)Online publication date: 3-Feb-2022
https://dl.acm.org/doi/10.1145/3502288
Chipidza WLeidner DBurleson D(2016)Why Companies Change Privacy PoliciesProceedings of the 2016 49th Hawaii International Conference on System Sciences (HICSS)10.1109/HICSS.2016.601(4849-4858)Online publication date: 5-Jan-2016
https://dl.acm.org/doi/10.1109/HICSS.2016.601
Garg VCamp L(2015)Why cybercrime?ACM SIGCAS Computers and Society10.1145/2809957.280996245:2(20-28)Online publication date: 30-Jul-2015
https://dl.acm.org/doi/10.1145/2809957.2809962
Chen YMak B(2015)Testing for Moral Hazard at the Tourist DestinationInternational Journal of Tourism Sciences10.1080/15980634.2011.1143463811:2(1-37)Online publication date: 3-Jun-2015
https://doi.org/10.1080/15980634.2011.11434638
Marx GMargulis S(2015)PrivacyThe Wiley Blackwell Encyclopedia of Consumption and Consumer Studies10.1002/9781118989463.wbeccs195(1-4)Online publication date: 24-Mar-2015
https://doi.org/10.1002/9781118989463.wbeccs195
Van Goethem TPiessens FJoosen WNikiforakis NAhn GYung MLi N(2014)Clubbing SealsProceedings of the 2014 ACM SIGSAC Conference on Computer and Communications Security10.1145/2660267.2660279(918-929)Online publication date: 3-Nov-2014
https://dl.acm.org/doi/10.1145/2660267.2660279
Hammock M(2012)Do Certification Seals Permit a Price Premium for Online Security and Privacy?Policy & Internet10.2202/1944-2866.11183:2(1-32)Online publication date: 10-Aug-2012
https://doi.org/10.2202/1944-2866.1118
Kelbert FShirazi FSimo HWüchner TBuchmann JPretschner AWaidner M(2012)State of Online Privacy: A Technical PerspectiveInternet Privacy10.1007/978-3-642-31943-3_4(189-279)Online publication date: 2012
https://doi.org/10.1007/978-3-642-31943-3_4
Kirlappos ISasse MHarvey N(2012)Why trust seals don't workProceedings of the 5th international conference on Trust and Trustworthy Computing10.1007/978-3-642-30921-2_18(308-324)Online publication date: 13-Jun-2012
https://dl.acm.org/doi/10.1007/978-3-642-30921-2_18
Show More Cited By

View Options

Get Access

Login options

Check if you have access through your login credentials or your institution to get full access on this article.

Full Access

Get this Publication

View options

PDF

View or Download as a PDF file.

eReader

View online with eReader.

Media

Figures

Other

Tables

View Table of Contents