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

The perceived integrity of online product recommendation agents (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 about users’ trust in the biased technologies. By applying the theoretical perspectives of psychological contract violation and knowledge-based trust, we intend to reveal when sponsorship disclosure is most effective in enhancing users’ perceived RA integrity. A laboratory experiment revealed two major findings. First, sponsorship disclosure leads to users’ perceived RA integrity via reduced perceived psychological contract violations of a biased RA, but only for users with high prior knowledge about the prevalence of sponsorships used by RAs in general. For users with limited 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. Theoretical and practical implications are discussed.