Many shoppers are prepared to pay a premium to protect their privacy when buying from an online retailer, a new Carnegie Mellon University study suggests.

'Our experiment shows that that once privacy information is made more visible, people will tend to purchase from merchants that offer more privacy protection and even pay a premium to purchase from such merchants.'—Lorrie Cranor, researcher

Researcher Lorrie Cranor, director of the Carnegie Mellon Usable Privacy and Security Labs, said U.S. consumers are willing to pay as much as 60 cents extra when making a $15 purchase for privacy protection.

In Cranor's experiment, 72 participants were asked to purchase a package of batteries and a sex toy. Researchers included the sex toy to determine if consumers would take additional measures to protect their personal information in the transaction.

Participants, using their own credit cards to make the purchases, were given a lump sum budget. They were reimbursed for their purchases and were told they could keep the money they did not spend.

The study found that when participants had a choice of a site that clearly posted its privacy policy and one that did not, consumers were willing to shell out a bit more. But participants tended to base their decisions on price when choosing from sites that didn't post any privacy policies and sites where the information was not found easily.

"Our experiment shows that that once privacy information is made more visible, people will tend to purchase from merchants that offer more privacy protection and even pay a premium to purchase from such merchants," Cranor said in the study.

"This was true for both privacy-sensitive and non-privacy-sensitive items."

The authors noted that threats of spam and identity theft are a common concern for consumers shopping online. Identity thieves commit fraud and other crimes by assuming someone else's identity. In Canada, there were 7,778 victims of identity theft, with losses over $16 million, in 2006.

Cranor said that while the researchers had expected people would be more cautious when purchasing the sex toy, the results were inconclusive.

The study will be presented at a workshop on the economics of information security at Carnegie Mellon University on Friday.