An economic model of portal competition under privacy concerns

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 d...

• Type: Conference
• Year: 2007
• Where: ACMICEC
• Authors: Ramnath K. Chellappa, Raymond G. Sin
• Keywords: ACMICEC 2007, ECommerce, Firms Provide Toolbars, Firms Value Consumers, MVI Firm