Using Active Privacy Transparency to Mitigate the Tension Between Data Access and Consumer Privacy

Recently, news exposure about privacy practices has brought substantial negative effects on companies' reputation and trust, which, in essence, reflects the escalating tension between data access and privacy protection that companies are currently facing. Accordingly, we design an active privacy transparency measure and implement it on our self-developed app. Through a two-task experiment, we simultaneously explore the profound and immediate effects of privacy transparency on firms and the underlying mechanisms. Results from our analyses show that active privacy transparency significantly mitigates users perceived psychological contract violations, which in turn helps companies prevent negative word-of-mouth and loss of trust. Moreover, it also ensures companies' immediate access to user data, and the moderating role of privacy literacy provides an explanation for this insignificant effect and previous inconsistent findings. More interestingly, we find that active privacy transparency might better elicit users' actual privacy preferences and help companies identify their targeted users.