Effects of Sponsorship Disclosure on Perceived Integrity of Biased Recommendation Agents: Psychological Contract Violation and Knowledge-Based Trust Perspectives

Product recommendation agents (RAs) are widely employed by online merchants to facilitate consumers’ decision making. Users’ perceived integrity of these RAs becomes a critical trust concern when RAs apply sponsorship practices and recommend products biased toward sponsored products. Sponsorship disclosure is enforced by the U.S. Federal Trade Commission, but many technologies fail to comply probably because of their concerns on users’ trust in the biased technologies. This research investigate when sponsorship disclosure is most effective in enhancing users’ perceived RA integrity. A laboratory experiment revealed two major findings related to the benefits of sponsorship disclosure in enhancing users’ perceived integrity of a biased RA. First, for users with high prior knowledge about the prevalence of sponsorships used by RAs in general, sponsorship disclosure can reduce users’ perceived psychological contract violations of a biased RA and then increase users’ perceived RA integrity. For users with limited such prior knowledge, the disclosure fails to reduce these perceived violations. Second, regardless of the level of such prior knowledge of users, sponsorship disclosure enhances users’ perceived transparency of a biased RA, which, in turn, leads to perceived RA integrity.