IDEAS home Printed from https://ideas.repec.org/a/eee/joreco/v64y2022ics0969698921003477.html
   My bibliography  Save this article

Pricing strategies of two-sided platforms considering privacy concerns

Author

Listed:
  • Duan, Yongrui
  • Liu, Peng
  • Feng, Yixuan

Abstract

Most online platforms, represented by news media, are keen to adopt a business model based on user subscription prices and advertising prices. However, in the context of the popularity of this subscription model, the contents and advertisements recommended by the platform also increase users' concerns about privacy, and the managerial implications of how to balance the revenue from users and advertisers to optimal platform profits are not well understood. We develop a two-sided model considering users' privacy concerns to investigate the optimal pricing strategy of online platforms. Specifically, we analyze the impacts of information disclosure level and user's privacy concerns for information disclosure on the optimal pricing strategy and surplus of users and advertisers. We find that the platform can strategically make pricing decisions based on the level of information disclosure to influence user demand and further promote the participation of advertisers, and when the information disclosure is at an intermediate level, the surplus of advertisers and users reaches the maximum. Besides, we discuss the conditions under which the online platform has an incentive to provide users with free services. We find that privacy concerns and information disclosure have a positive effect on the platform's free strategy.

Suggested Citation

  • Duan, Yongrui & Liu, Peng & Feng, Yixuan, 2022. "Pricing strategies of two-sided platforms considering privacy concerns," Journal of Retailing and Consumer Services, Elsevier, vol. 64(C).
    • Handle: RePEc:eee:joreco:v:64:y:2022:i:c:s0969698921003477
    DOI: 10.1016/j.jretconser.2021.102781
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0969698921003477
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jretconser.2021.102781?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. M. Yenmez, 2014. "Pricing in position auctions and online advertising," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 55(1), pages 243-256, January.
    2. Garrett A. Johnson & Scott K. Shriver & Shaoyin Du, 2020. "Consumer Privacy Choice in Online Advertising: Who Opts Out and at What Cost to Industry?," Marketing Science, INFORMS, vol. 39(1), pages 33-51, January.
    3. Avi Goldfarb & Catherine Tucker, 2011. "Online Display Advertising: Targeting and Obtrusiveness," Marketing Science, INFORMS, vol. 30(3), pages 389-404, 05-06.
    4. Benndorf, Volker & Kübler, Dorothea & Normann, Hans-Theo, 2015. "Privacy concerns, voluntary disclosure of information, and unraveling: An experiment," European Economic Review, Elsevier, vol. 75(C), pages 43-59.
    5. Avi Goldfarb & Catherine E. Tucker, 2011. "Privacy Regulation and Online Advertising," Management Science, INFORMS, vol. 57(1), pages 57-71, January.
    6. Gerlach, Jin & Widjaja, Thomas & Buxmann, Peter, 2015. "Handle with Care: How Online Social Network Providers’ Privacy Policies Impact Users’ Information Sharing Behavior," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 66108, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    7. Avi Goldfarb & Catherine Tucker, 2011. "Rejoinder--Implications of "Online Display Advertising: Targeting and Obtrusiveness"," Marketing Science, INFORMS, vol. 30(3), pages 413-415, 05-06.
    8. Amin Sayedi, 2018. "Real-Time Bidding in Online Display Advertising," Marketing Science, INFORMS, vol. 37(4), pages 553-568, August.
    9. Jaisingh, Jeevan & Barron, Jack & Mehta, Shailendra & Chaturvedi, Alok, 2008. "Privacy and pricing personal information," European Journal of Operational Research, Elsevier, vol. 187(3), pages 857-870, June.
    10. Henk Kox & Bas Straathof & Gijsbert Zwart, 2017. "Targeted advertising, platform competition, and privacy," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 26(3), pages 557-570, September.
    11. Xie, Yi & Chen, Ke & Guo, Xiaoling, 2020. "Online anthropomorphism and consumers’ privacy concern: Moderating roles of need for interaction and social exclusion," Journal of Retailing and Consumer Services, Elsevier, vol. 55(C).
    12. S. J. Liebowitz & Stephen E. Margolis, 1994. "Network Externality: An Uncommon Tragedy," Journal of Economic Perspectives, American Economic Association, vol. 8(2), pages 133-150, Spring.
    13. Payam Hanafizadeh & Mohammad Reza Harati Nik, 2020. "Configuration of Data Monetization: A Review of Literature with Thematic Analysis," Global Journal of Flexible Systems Management, Springer;Global Institute of Flexible Systems Management, vol. 21(1), pages 17-34, March.
    14. Yu (Jeffrey) Hu & Jiwoong Shin & Zhulei Tang, 2016. "Incentive Problems in Performance-Based Online Advertising Pricing: Cost per Click vs. Cost per Action," Management Science, INFORMS, vol. 62(7), pages 2022-2038, July.
    15. Kumar, Subodha & Sethi, Suresh P., 2009. "Dynamic pricing and advertising for web content providers," European Journal of Operational Research, Elsevier, vol. 197(3), pages 924-944, September.
    16. Justin P. Johnson, 2013. "Targeted advertising and advertising avoidance," RAND Journal of Economics, RAND Corporation, vol. 44(1), pages 128-144, March.
    17. Esther Gal-Or & Ronen Gal-Or & Nabita Penmetsa, 2018. "The Role of User Privacy Concerns in Shaping Competition Among Platforms," Information Systems Research, INFORMS, vol. 29(3), pages 698-722, September.
    18. Shalinda Adikari & Kaushik Dutta, 2019. "A New Approach to Real-Time Bidding in Online Advertisements: Auto Pricing Strategy," INFORMS Journal on Computing, INFORMS, vol. 31(1), pages 66-82, February.
    19. Tommaso Valletti & Jiahua Wu, 2020. "Consumer Profiling with Data Requirements: Structure and Policy Implications," Production and Operations Management, Production and Operations Management Society, vol. 29(2), pages 309-329, February.
    20. Choi, Jay Pil & Jeon, Doh-Shin & Kim, Byung-Cheol, 2019. "Privacy and personal data collection with information externalities," Journal of Public Economics, Elsevier, vol. 173(C), pages 113-124.
    21. Sami Najafi-Asadolahi & Kristin Fridgeirsdottir, 2014. "Cost-per-Click Pricing for Display Advertising," Manufacturing & Service Operations Management, INFORMS, vol. 16(4), pages 482-497, October.
    22. Ramon Casadesus-Masanell & Andres Hervas-Drane, 2015. "Competing with Privacy," Management Science, INFORMS, vol. 61(1), pages 229-246, January.
    23. Alexandre de Cornière & Romain de Nijs, 2016. "Online advertising and privacy," RAND Journal of Economics, RAND Corporation, vol. 47(1), pages 48-72, February.
    24. Esteves, Rosa-Branca & Resende, Joana, 2019. "Personalized pricing and advertising: Who are the winners?," International Journal of Industrial Organization, Elsevier, vol. 63(C), pages 239-282.
    25. Kursad Asdemir & Nanda Kumar & Varghese S. Jacob, 2012. "Pricing Models for Online Advertising: CPM vs. CPC," Information Systems Research, INFORMS, vol. 23(3-part-1), pages 804-822, September.
    26. Janice Y. Tsai & Serge Egelman & Lorrie Cranor & Alessandro Acquisti, 2011. "The Effect of Online Privacy Information on Purchasing Behavior: An Experimental Study," Information Systems Research, INFORMS, vol. 22(2), pages 254-268, June.
    27. Edward G. Anderson & Geoffrey G. Parker & Burcu Tan, 2014. "Platform Performance Investment in the Presence of Network Externalities," Information Systems Research, INFORMS, vol. 25(1), pages 152-172, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Cheng, Junjun & Chen, Bo & Huang, Zihang, 2023. "Collective-based ad transparency in targeted hotel advertising: Consumers’ regulatory focus underlying the crowd safety effect," Journal of Retailing and Consumer Services, Elsevier, vol. 72(C).
    2. Chen, Chen & Duan, Yongrui, 2022. "Impact of personalization and privacy concerns on information disclosure and pricing," Journal of Retailing and Consumer Services, Elsevier, vol. 69(C).
    3. Xiaojie Sun, 2023. "Strategy analysis for a digital content platform considering perishability," Annals of Operations Research, Springer, vol. 320(1), pages 415-439, January.
    4. Li, Cui & Li, Hong & Tao, Changqi, 2023. "Evolutionary game of platform enterprises, government and consumers in the context of digital economy," Journal of Business Research, Elsevier, vol. 167(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hana Choi & Carl F. Mela & Santiago R. Balseiro & Adam Leary, 2020. "Online Display Advertising Markets: A Literature Review and Future Directions," Information Systems Research, INFORMS, vol. 31(2), pages 556-575, June.
    2. Yongrui Duan & Yao Ge & Yixuan Feng, 2022. "Pricing and personal data collection strategies of online platforms in the face of privacy concerns," Electronic Commerce Research, Springer, vol. 22(2), pages 539-559, June.
    3. Anna D’Annunzio & Antonio Russo, 2020. "Ad Networks and Consumer Tracking," Management Science, INFORMS, vol. 66(11), pages 5040-5058, November.
    4. Cloarec, Julien, 2020. "The personalization–privacy paradox in the attention economy," Technological Forecasting and Social Change, Elsevier, vol. 161(C).
    5. Bleier, Alexander & Goldfarb, Avi & Tucker, Catherine, 2020. "Consumer privacy and the future of data-based innovation and marketing," International Journal of Research in Marketing, Elsevier, vol. 37(3), pages 466-480.
    6. Jin, Ginger Zhe & Wagman, Liad, 2021. "Big data at the crossroads of antitrust and consumer protection," Information Economics and Policy, Elsevier, vol. 54(C).
    7. Jan Krämer & Daniel Schnurr & Michael Wohlfarth, 2019. "Winners, Losers, and Facebook: The Role of Social Logins in the Online Advertising Ecosystem," Management Science, INFORMS, vol. 65(4), pages 1678-1699, April.
    8. Kelly D. Martin & Patrick E. Murphy, 2017. "The role of data privacy in marketing," Journal of the Academy of Marketing Science, Springer, vol. 45(2), pages 135-155, March.
    9. Sajeesh, S. & Singh, Ashutosh & Bhardwaj, Pradeep, 2022. "Optimal checkout strategies for online retailers," Journal of Retailing, Elsevier, vol. 98(3), pages 378-394.
    10. Esther Gal-Or & Ronen Gal-Or & Nabita Penmetsa, 2018. "The Role of User Privacy Concerns in Shaping Competition Among Platforms," Information Systems Research, INFORMS, vol. 29(3), pages 698-722, September.
    11. Dengler, Sebastian & Prüfer, Jens, 2021. "Consumers' privacy choices in the era of big data," Games and Economic Behavior, Elsevier, vol. 130(C), pages 499-520.
    12. Sameer Mehta & Milind Dawande & Ganesh Janakiraman & Vijay Mookerjee, 2020. "Sustaining a Good Impression: Mechanisms for Selling Partitioned Impressions at Ad Exchanges," Information Systems Research, INFORMS, vol. 31(1), pages 126-147, March.
    13. David A. Schweidel & Yakov Bart & J. Jeffrey Inman & Andrew T. Stephen & Barak Libai & Michelle Andrews & Ana Babić Rosario & Inyoung Chae & Zoey Chen & Daniella Kupor & Chiara Longoni & Felipe Thomaz, 2022. "How consumer digital signals are reshaping the customer journey," Journal of the Academy of Marketing Science, Springer, vol. 50(6), pages 1257-1276, November.
    14. Haifei Yu & Shanshan Zheng & Hao Wu, 2023. "User Privacy Awareness, Incentive and Data Supply Chain Pricing Strategy," Sustainability, MDPI, vol. 15(4), pages 1-24, February.
    15. Helia Marreiros & Mirco Tonin & Michael Vlassopoulos & M.C. Schraefel, 2016. "“Now that you mention it”: A Survey Experiment on Information, Salience and Online Privacy," BEMPS - Bozen Economics & Management Paper Series BEMPS34, Faculty of Economics and Management at the Free University of Bozen.
    16. Anna D’Annunzio & Antonio Russo, 2024. "Intermediaries in the Online Advertising Market," Marketing Science, INFORMS, vol. 43(1), pages 33-53, January.
    17. Michael Kummer & Patrick Schulte, 2019. "When Private Information Settles the Bill: Money and Privacy in Google’s Market for Smartphone Applications," Management Science, INFORMS, vol. 65(8), pages 3470-3494, August.
    18. Morlok, Tina & Matt, Christian & Hess, Thomas, 2017. "Privatheitsforschung in den Wirtschaftswissenschaften: Entwicklung, Stand und Perspektiven," Working Papers 1/2017, University of Munich, Munich School of Management, Institute for Information Systems and New Media.
    19. Veronica Marotta & Yue Wu & Kaifu Zhang & Alessandro Acquisti, 2022. "The Welfare Impact of Targeted Advertising Technologies," Information Systems Research, INFORMS, vol. 33(1), pages 131-151, March.
    20. Xudong Lin & Shuilin Liu & Xiaoli Huang & Hanyang Luo & Sumin Yu, 2021. "Platform Revenue Strategy Selection Considering Consumer Group Data Privacy Regulation," Mathematics, MDPI, vol. 9(22), pages 1-24, November.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:joreco:v:64:y:2022:i:c:s0969698921003477. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: https://www.journals.elsevier.com/journal-of-retailing-and-consumer-services .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.