Competing with Privacy

Ramon Casadesus-Masanell () and Andres Hervas-Drane ()
Additional contact information
Ramon Casadesus-Masanell: Harvard Business School, Harvard University, Boston, Massachusetts 02163
Andres Hervas-Drane: Cass Business School, City University London, London EC1Y 8TZ, United Kingdom

Management Science, 2015, vol. 61, issue 1, 229-246

Abstract: We analyze the implications of consumer privacy for competition in the marketplace. Firms compete for consumer information and derive revenues both from consumer purchases as well as from disclosing consumer information in a secondary market. Consumers choose which firm to patronize and how much personal information to provide it with. We show that firms maximize profits by focusing on a single revenue source and competing at the extensive rather than the intensive margin, outperforming competitors by attracting a larger customer base. We also show that competition drives the provision of services with a low level of consumer information disclosure (high level of privacy), but higher competition intensity in the marketplace need not improve privacy when consumers exhibit low willingness to pay. Our findings are relevant to the business models of Internet firms and contribute to inform the regulatory debate on consumer privacy. This paper was accepted by Bruno Cassiman, business strategy.

Keywords: information acquisition; information disclosure; online privacy; privacy regulation (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (87)

Downloads: (external link)
http://dx.doi.org/10.1287/mnsc.2014.2023 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:61:y:2015:i:1:p:229-246

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().