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Conference Paper: An economic model of portal competition under privacy concerns

TitleAn economic model of portal competition under privacy concerns
Authors
KeywordsNash-equilibrium
Personalization
Privacy
Spatial competition
Welfare analysis
Issue Date2007
Citation
Acm International Conference Proceeding Series, 2007, v. 258, p. 15-24 How to Cite?
Abstract
Due to inherent privacy concerns, online personalization services such as those offered through toolbars and desktop widgets are characterized by "no-free-disposal" (NFD) property, in that more services are not necessarily better for the consumer. There are two defining characteristics of this market: First, these services are "free" as firms value consumers' preference information shared for personalization; second, while some firms provide toolbars of a fixed-length as a take-it or leave-it offer, many others offer consumers the option of choosing a subset of the services offered. Our findings suggest that in a fixed-services duopoly where firms are endowed with sufficiently different marginal values for information (MVIs), the high MVI firm caters to convenience seekers in the market while the low MVI firm serves a portion of largely privacy seeking consumers in equilibrium; if the duopoly were characterized by sufficiently high MVIs, firms would minimize differentiation and offer the same number of services. However, when two high-MVI firms pursue variable-services strategy, there is a unique symmetric equilibrium that maximizes consumer surplus. Counter to intuition, some very high-MVI firms may prefer the consumer-surplus maximizing strategy of offering the full set of variable services over the fixed-services strategy, thus maximizing both consumer and social welfares. Our results lead to important managerial and policy implications and interesting extensions to the existing location models. Copyright 2007 ACM.
Persistent Identifierhttp://hdl.handle.net/10722/159080
References

 

Author Affiliations
  1. Emory University
  2. Hong Kong University of Science and Technology
DC FieldValueLanguage
dc.contributor.authorChellappa, RKen_HK
dc.contributor.authorSin, RGen_HK
dc.date.accessioned2012-08-08T09:07:08Z-
dc.date.available2012-08-08T09:07:08Z-
dc.date.issued2007en_HK
dc.identifier.citationAcm International Conference Proceeding Series, 2007, v. 258, p. 15-24en_US
dc.identifier.urihttp://hdl.handle.net/10722/159080-
dc.description.abstractDue to inherent privacy concerns, online personalization services such as those offered through toolbars and desktop widgets are characterized by "no-free-disposal" (NFD) property, in that more services are not necessarily better for the consumer. There are two defining characteristics of this market: First, these services are "free" as firms value consumers' preference information shared for personalization; second, while some firms provide toolbars of a fixed-length as a take-it or leave-it offer, many others offer consumers the option of choosing a subset of the services offered. Our findings suggest that in a fixed-services duopoly where firms are endowed with sufficiently different marginal values for information (MVIs), the high MVI firm caters to convenience seekers in the market while the low MVI firm serves a portion of largely privacy seeking consumers in equilibrium; if the duopoly were characterized by sufficiently high MVIs, firms would minimize differentiation and offer the same number of services. However, when two high-MVI firms pursue variable-services strategy, there is a unique symmetric equilibrium that maximizes consumer surplus. Counter to intuition, some very high-MVI firms may prefer the consumer-surplus maximizing strategy of offering the full set of variable services over the fixed-services strategy, thus maximizing both consumer and social welfares. Our results lead to important managerial and policy implications and interesting extensions to the existing location models. Copyright 2007 ACM.en_HK
dc.languageengen_US
dc.relation.ispartofACM International Conference Proceeding Seriesen_HK
dc.subjectNash-equilibriumen_HK
dc.subjectPersonalizationen_HK
dc.subjectPrivacyen_HK
dc.subjectSpatial competitionen_HK
dc.subjectWelfare analysisen_HK
dc.titleAn economic model of portal competition under privacy concernsen_HK
dc.typeConference_Paperen_HK
dc.identifier.emailSin, RG: rays@hku.hken_HK
dc.identifier.authoritySin, RG=rp01618en_HK
dc.description.naturelink_to_subscribed_fulltexten_US
dc.identifier.doi10.1145/1282100.1282106en_HK
dc.identifier.scopuseid_2-s2.0-36849071353en_HK
dc.relation.referenceshttp://www.scopus.com/mlt/select.url?eid=2-s2.0-36849071353&selection=ref&src=s&origin=recordpageen_HK
dc.identifier.volume258en_HK
dc.identifier.spage15en_HK
dc.identifier.epage24en_HK
dc.identifier.scopusauthoridChellappa, RK=7102623748en_HK
dc.identifier.scopusauthoridSin, RG=23036867300en_HK

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