关键词: 隐私信息共享水平, 定向广告, 大众广告, 产品定价

Abstract: The omnipresence of targeted advertising means that more and more consumer privacy information is accessed, transferred or stored, consumers are also becoming increasingly aware that their online activities are being monitored and their privacy is possibly being shared.Unlike consumer privacy information obtained directly, consumers actively sharing their privacy information makes the online seller’s price decision more complicated as the consumer’s privacy is no longer a constant for the seller and is instead flexibly controlled by the consumer. We mainly investigate sellers’ optimal price and advertising strategies in terms of the degree of consumer privacy sharing and try to answer these questions: (1)Do sellers benefit from consumer privacy sharing? (2)How does the degree of consumer privacy sharing affect price decisions? (3)In a competitive market, how does the neighbour seller’s product value affect price decisions?
To address these questions, we consider a Salop circular city model as it allows several sellers in the market. In this model, consumer privacy is endogenous, and the degree of consumer privacy sharing is actively managed by the consumer. Sellers first decide whether to use consumer privacy information to target their advertising and then bid for the advertising slot. There are two types of advertising: If sellers do not use consumer privacy information, they place a mass advertisement; If sellers use consumer privacy information, they place a targeted advertisement.
As a benchmark, we consider the duopoly case where two sellers sell products with the same value. We first compare the profit of the winning seller when using/not using consumer information and conclude that mass advertisements (not using consumer information) perform better than targeted advertisements (using consumer information) in the duopoly case.In addition, the consumer information shared by consumers increases the price to a certain extent, but when the level of consumer information sharing higher than a threshold, sellers need to reduce the price. Moreover, we also find that the effects of consumer information sharing on the price strategy are different for the dominant and non-dominant sellers. For dominant sellers, our results show that they would raise their price until the degree of consumer information sharing is greater than a threshold. For non-dominant sellers, the result seems more complicated as the effect of consumer information sharing on non-dominant sellers’ price could be different when non-dominant sellers’ product value is in a different segment.
Finally, in a multi-oligopoly, we find that the dominant seller’s profit is affected by the relative value of its product to that of the neighbour seller’s product, in addition to the degree of consumer information sharing. Specifically, the dominant seller’s profit increases with an increasing degree of consumer information sharing when the value of the seller’s product is sufficiently large. We also conclude that every seller’s demand and profit are affected by their neighbour sellers’ product value.
This paper has studied a Salop circular city model where consumers actively manage their information sharing. The general conclusion from our study is that using consumer information to target advertising will not benefit the seller in a duopoly. In other words, targeted advertisements might result in lower profits than mass advertisements in a duopoly. However, this changes when there are more sellers in the market.In addition, our paper implies that the effect of consumer information sharing on price decision is driven by different sellers. Furthermore, our analysis shows that the dominant seller can benefit from a medium degree of consumer information sharing in a multi-oligopoly when the seller’s product value is sufficiently large. These findings imply that sellers can gain consumer trust by giving customers access to manage their information.

Key words: privacy sharing level, targeted advertising, mass advertising, product pricing