Privacy, competition, and multi-homing

Two platforms compete in prices and information disclosure levels. Platforms derive revenues from two possible channels, i.e., by supplying their service to consumers and by selling consumer data to a data intermediary. While a consumer signing up to one platform's service decides how much personal information to provide to improve service quality, the platform chooses how much such consumer data to share with the third-party data intermediary. We find that platforms essentially trade-off between consumer valuations and disclosure levels to determine their business strategies when consumers single-home. Under multi-homing, business strategies are more complex to assess and may completely shift compared to single-homing. The valuation of consumer data onto the data intermediary is a decisive component of platforms' choices. All things being equal, implementing a strict privacy regime with no data disclosure can be optimal under single-homing, while a soft privacy regime with data disclosure may be preferred under multi-homing.