Consumer Information Disclosing Strategy within Consumer Misrepresentation

Abstract

To decrease privacy risks, consumers may choose to misrepresent when they are asked to offer personal information. This paper examines the impact of consumer misrepresentation on a monopolistic firm and consumers with an economic model. The results show that consumer misrepresentation may benefit the firm but hurt consumers. In addition, consumers misrepresentation may encourage the firm to provide higher personalized service level in certain scenarios, such as, when the unit cost of personalized service is low. Thirdly, when consumers misrepresent, and the firm only covers part of the market, a greater unit value of consumer’s privacy information will reduce the firm’s profit, but a greater unit cost of personalized service increases the firm’s profit.