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with intentions and behavior (Stone & Winter,
1987). Pavlou (2003) suggests that behavioral
uncertainty is created as a result of Web retailers
misrepresenting products, leaking private infor-
mation, providing misleading advertising, using
false identities, and denouncing warranties. Spe-
cifically, consumers may perceive risks in terms
of monetary losses (economic risk), the purchase
of unsafe products and services (personal risk),
imperfect monitoring of products (seller perfor-
mance risk), and disclosure of private informa-
tion (privacy risks). Environmental uncertainty
is also an important issue leading consumers to
fear theft of personal information online. Con-
sumer intentions to transact business online are
thus “contingent upon beliefs about Web retail-
ers that are partly determined by behavioral and
environmental factors”, and therefore perceived
risk is likely to negatively influence consumer's
intentions to undertake transactions on Internet
sites (Pavlou, 2003).
Risk has been studied in a number of contexts
such as food technology (Frewer, 1994), banking
(Ho & Ng, 1994), and retail patronage mode, for
example, mail order, catalogue, and in-home
shopping (Festerand, Snyder, & Tsalikis, 1986;
Schiffman, Schus, & Winer, 1976). Different
types of perceived risk have been identified, in-
cluding functional, physical, financial, social, and
psychological risk (Kaplan, Szybillo, & Jacoby,
1974). Saythe (1999) studied the risk referred to as
“the security and reliability of transactions over
the Internet”, a type of physical risk, and found
that this type of risk was a significant barrier to
diffusion of Internet banking. Bhatnagar, Misra,
and Rao (2000) examined financial and product
risk in purchasing on the Web where financial risk
is related to the possibility of credit card fraud.
Product risk was not as important as financial
risk in predicting likelihood of online purchase.
Recently, Slyke, Shim, Johnson, and Jiang (2006)
also found that concern for information privacy
affects risk perceptions, trust, and willingness
to transact for a well-known merchant, but not
for a less well-known merchant, suggesting that
risk perception may be different depending on
the company and the users experience in dealing
with that company.
Perceived risk generally produces wariness or
risk aversion and leads to a variety of risk handling
behaviors which include buying well known, major
brands, brand loyal behavior, seeking informa-
tion, wider search, increased use of use of word
of mouth information sources, a preference for
congruent rather than incongruent products in a
product category, or avoiding purchase altogether
(Campbell & Goodstein, 2001; Dowling & Staelin,
1994; Roselius, 1971). Concerns about privacy
were not found to affect online purchasing rates
directly, neither was concern about online retailer
fraud, such as nondelivery of goods or misrep-
resentation of goods (Miyazaki & Fernandez,
2001). Only the general perceived risk of online
purchase and what was termed in the study “system
security issues”, such as unauthorised access to
personal and credit card information, were found
to directly affect rates of online purchase.
Empirical research examining privacy con-
cerns and experienced online consumers is
beginning to emerge. For example, Graeff and
Harmon (2002) undertook a study of U.S. con-
sumers and asked about their privacy concerns,
use, and familiarity with loyalty cards and online
purchase behavior. Those with online purchase
experience were significantly more likely than
nonpurchasers to consider that customers should
be informed and have a say in such information
gathering and selling practices. In addition,
Koyuncu and Lien (2002) found that those with
more online experience in a private and secure
home environment were more likely to purchase on
the Internet. This was also supported by Bellman,
Johnson, Kobrin, and Lohse (2004) who found
that privacy concerns diminished with increased
online experience in a sample of Internet users
from 38 countries. Research by Milne, Rohm,
and Bahl (2004) suggests that the reason for this
is that experienced online consumers tend to be
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