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Information security investment and purchase decision for personalized products

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  • Lu Xu
  • Yanhui Li
  • Qi Yao

Abstract

Considering information security and personalization paradoxes, this paper investigates the optimal information security investments of a firm and purchasing decisions of consumers with different privacy concerns in online personalization. It is found that consumers and firm tend to fall into a prisoner's dilemma in Nash equilibrium. To improve security investment efficiency and boost personalization consumption, firm‐led Stackelberg game and firm‐led Stackelberg game with punishment mechanism are proposed and analyzed. The results indicate that the security information measures firm take in advance can effectively increase the waverers' willingness to purchase personalized products. Government punishment helps to facilitate a win‐win situation but does not work when proportion of wavers in the market is very small. Furthermore, the responses of equilibrium strategies and payoffs to related characteristics are discussed numerically. Finally, some managerial insights are recommended to firms who provide personalized products for making proper security investment and to government departments for formulating security punishment policies.

Suggested Citation

  • Lu Xu & Yanhui Li & Qi Yao, 2022. "Information security investment and purchase decision for personalized products," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(6), pages 2619-2635, September.
    • Handle: RePEc:wly:mgtdec:v:43:y:2022:i:6:p:2619-2635
    DOI: 10.1002/mde.3551
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    References listed on IDEAS

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