Competitive Price-Quality Strategy of Platforms under User Privacy Concerns

Abstract

The behavior-based discrimination price model (BBPD) needs to collect a large amount of user information, which would spark user privacy concerns. However, the literature on BBPD typically overlooks consumer privacy concerns. Additionally, most of the existing research provides some insights from the perspective of traditional privacy protection measures, but seldom discusses the role of quality discrimination in alleviating users’ privacy concerns. By establishing a Hotelling duopoly model of two-period price-quality competition, this paper explores the impact of quality discrimination on industry profits, user surplus, and social welfare under user privacy concerns. The results show that, with the increase of user privacy cost, given weak market competition intensity, quality discrimination can increase users’ surplus and social welfare, thereby alleviating users’ privacy concerns. We then discuss the managerial implications for alleviating consumer privacy concerns. In addition, we take Airbnb as an example to provide practical implications.

How does cross‐platform externality impact pricing strategies? A two‐stage discriminatory pricing model analysis

“…Chung (2020) examined the impacts of BBPD on profits, consumer surplus, and welfare when firms choose their product qualities; the results indicate that the profit and consumer surplus effects of BBPD relative to uniform pricing depend on the level of consumers' myopia or quality improvement costs. Lin et al (2022) combined BBPD with quality discrimination and examined the optimal strategies regarding the price and quality of product or service by competing platforms under user privacy concerns. The results indicate that platforms will set lower prices for new users and higher quality for existing users when users' privacy cost is high and competition intensity is weak, or when users' privacy cost is low and competition intensity is strong.…”

“…Numerous scholars have examined the influence of BBPD strategies within the competitive landscape of independent platforms (Chen & Gong, 2023;De Nijs, 2017;Lin et al, 2022;Ma et al, 2023;Umezawa, 2022;Wang et al, 2023), and a handful have explored cross-platform externalities (Kim, 2012;Suarez & Kirtley, 2012). However, there is a notable scarcity of scholarly efforts that integrate these two aspects to examine the influence of cross-platform externalities on platform BBPD.…”

Research on the Regulation of Algorithmic Price Discrimination Behaviour of E-Commerce Platform Based on Tripartite Evolutionary Game

“…At this time, consumers will spend more time and energy to compare product prices, which will significantly affect consumers' purchase decisions [13]. Consumers have a preference for price fairness [14] and an aversion to privacy intrusion [15], and once they find that prices are unfair, a strong sense of betrayal will arise [16], and they will take action to complain and expand the influence of social opinion [17].…”

Managing multi-sided platforms in an emerging country: challenges, critical success factors and contrasts with traditional companies

“…Some authors terms this model as “iBusiness” (Brouthers et al. , 2016), emphasizing the competitive edge gained by leveraging customer data (Lin et al. , 2022).…”

“…These platforms serve as facilitators creating value for users through infrastructure, information, and technology (Hagiu and Wright, 2015). Some authors terms this model as "iBusiness" (Brouthers et al, 2016), emphasizing the competitive edge gained by leveraging customer data (Lin et al, 2022).…”