Market Failure theory is a framework that examines situations where markets cannot allocate resources efficiently. Data breaches can be seen as a form of market failure. The failure to adequately secure customer data can lead to negative externalities such as potential identity theft or fraud. This means that customers may incur costs due to the breach not accounted for in the market transactions.
Cost-benefit analysis is a theory that customers apply when purchasing online platforms. A data breach introduces new costs that customers did not initially consider. This theory highlights how customers may reassess the website’s benefits against the possible risks following the breach.
Social Exchange Theory examines the social relationships between individuals involved in transactions and their associated costs and benefits. Customers engaged in transactions with the website expect benefits like purchasing goods while minimizing risks. However, the breach disrupts this exchange by exposing customers to the risk of identity theft or fraud, leading to a breakdown in trust between the customers and the website.
Conflict Theory emphasizes power imbalances and conflicts of interest in social interactions. In the breach incident, a clear power imbalance exists between the website’s platform provider, who controls customer data, and the customers themselves. The breach highlights the conflict between the provider’s negligence in safeguarding customer data and the customers’ expectation of privacy and security. This breach exacerbates tensions between individuals and institutions regarding confidentiality and data security, reflecting broader societal conflicts over control and ownership of personal information.
All of these relate to the letter due to them all surrounding conflicts that have to do with losing something such as money.
