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Conference Paper: An economic model of portal competition under privacy concerns
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TitleAn economic model of portal competition under privacy concerns
 
AuthorsChellappa, RK1
Sin, RG2
 
KeywordsNash-equilibrium
Personalization
Privacy
Spatial competition
Welfare analysis
 
Issue Date2007
 
CitationAcm International Conference Proceeding Series, 2007, v. 258, p. 15-24 [How to Cite?]
DOI: http://dx.doi.org/10.1145/1282100.1282106
 
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.
 
DOIhttp://dx.doi.org/10.1145/1282100.1282106
 
ReferencesReferences in Scopus
 
DC FieldValue
dc.contributor.authorChellappa, RK
 
dc.contributor.authorSin, RG
 
dc.date.accessioned2012-08-08T09:07:08Z
 
dc.date.available2012-08-08T09:07:08Z
 
dc.date.issued2007
 
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.
 
dc.description.naturelink_to_subscribed_fulltext
 
dc.identifier.citationAcm International Conference Proceeding Series, 2007, v. 258, p. 15-24 [How to Cite?]
DOI: http://dx.doi.org/10.1145/1282100.1282106
 
dc.identifier.doihttp://dx.doi.org/10.1145/1282100.1282106
 
dc.identifier.epage24
 
dc.identifier.scopuseid_2-s2.0-36849071353
 
dc.identifier.spage15
 
dc.identifier.urihttp://hdl.handle.net/10722/159080
 
dc.identifier.volume258
 
dc.languageeng
 
dc.relation.ispartofACM International Conference Proceeding Series
 
dc.relation.referencesReferences in Scopus
 
dc.subjectNash-equilibrium
 
dc.subjectPersonalization
 
dc.subjectPrivacy
 
dc.subjectSpatial competition
 
dc.subjectWelfare analysis
 
dc.titleAn economic model of portal competition under privacy concerns
 
dc.typeConference_Paper
 
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Author Affiliations
  1. Emory University
  2. Hong Kong University of Science and Technology