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Security in digital markets

Author

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  • Sánchez, Mariola
  • Urbano, Amparo

Abstract

This paper contributes to the literature on security in digital markets. We analyze a two-period monopoly market in which consumers have privacy concerns. We make three assumptions about privacy: first, that it evolves over time; second, that it has a value that is unknown by all market participants in the first period; and third, that it may affect market participants' willingness to pay for products. The monopolist receives a noise signal about consumers' average privacy. This signal allows the monopolist to adjust the price in the second period and engage in price discrimination. The monopolist's price in period 2 acts as a signal to consumers about privacy. This signal, together with consumers' purchase experiences from the first period, determines demand. We address two scenarios: direct investment in security to improve consumers' experiences and investment in market signal precision.

Suggested Citation

  • Sánchez, Mariola & Urbano, Amparo, 2019. "Security in digital markets," Journal of Business Research, Elsevier, vol. 101(C), pages 485-491.
    • Handle: RePEc:eee:jbrese:v:101:y:2019:i:c:p:485-491
    DOI: 10.1016/j.jbusres.2018.12.066
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    Cited by:

    1. Fehrenbach, David & Herrando, Carolina, 2021. "The effect of customer-perceived value when paying for a product with personal data: A real-life experimental study," Journal of Business Research, Elsevier, vol. 137(C), pages 222-232.
    2. Cheah, Jun-Hwa & Lim, Xin-Jean & Ting, Hiram & Liu, Yide & Quach, Sara, 2022. "Are privacy concerns still relevant? Revisiting consumer behaviour in omnichannel retailing," Journal of Retailing and Consumer Services, Elsevier, vol. 65(C).

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