Economic Theories:
- Information Asymmetry:
- Economic theory suggests that information asymmetry occurs when one party in a transaction has more or better information than the other. In the case of the data breach notification letter, the company was aware of the breach but the customers were not until much later. This information asymmetry can lead to adverse outcomes, such as customers being unaware of the potential risk to their personal information.
- Market Failure and Externalities:
- Market failure occurs when the allocation of goods and services is not efficient due to various factors. In this case, the data breach represents a negative externality imposed on the customers. The breach was a failure of the market to protect customer data adequately, and the costs of this failure (such as potential identity theft or fraud) are borne by the customers rather than the company or platform provider responsible for the breach.
Social Sciences Theories:
- Trust and Social Contract Theory:
- Social contract theory posits that individuals give up some freedoms to the government or society in exchange for protection and security. Similarly, customers trust companies with their personal information, assuming it will be kept secure. The breach of this trust undermines the social contract between the company and its customers, leading to feelings of betrayal and loss of confidence.
- Diffusion of Responsibility and Bystander Effect:
- These social psychology theories suggest that individuals are less likely to take action in a group setting where responsibility is diffused among multiple parties. In the data breach context, customers may feel less inclined to take immediate action to protect themselves if they perceive that the company or platform provider is not taking sufficient responsibility or action to address the breach. This diffusion of responsibility can delay necessary steps to mitigate the potential harm caused by the breach.