Consumer privacy concerns, exclusive data access and personalized pricing

With the availability of consumer data and advanced data analytics techniques, firms are increasingly implementing personalized pricing, which has raised significant concerns about consumer privacy. In this study, we build an analytical model to investigate the impact of consumer privacy concerns and exclusive data access on firms' personalized pricing and profits, as well as consumer surplus. Intriguingly, our result shows that a high privacy concern may lead to higher consumer surplus as it intensifies the competition between firms. From the firms' information structure perspective, we find that a higher proportion of loyal consumers can be detrimental to firms and makes consumers better off. Moreover, compared with non-personalized pricing, we surprisingly show that personalized pricing can lead to a higher consumer surplus even though consumer privacy concerns are high. We discuss the managerial implications of our findings and provide future research directions.