189 / 2024-04-22 21:35:36

Implications of Consumer Manipulation and Inequity Aversion on Transparency of Personalized Pricing

Personalized pricing; Consumer privacy; Fairness concerns; Social welfare.

The increasingly mature information technology and abundant data resources are empowering platform companies to employ personalized pricing strategies by using consumer privacy information. However, real-world scenarios introduce additional complexities, as consumers not only consider transnational fairness but also consider concealing their identities to protect their private information. Surprisingly, little research has explicitly examined the question of whether platform companies should disclose their personalized pricing practices in the presence of consider consumer fairness with privacy preferences concerns. In this paper, we present a game-theoretic model that addresses this gap by exploring a dynamic market environment where platform companies make strategic decisions on transparent personalized pricing strategies. Contrary to conventional wisdom, this study findings reveal that personalized pricing transparency can sometimes yield increased profits for platform companies but simultaneously diminish consumer surplus and social welfare. Consequently, from public policy makers perspective, mandating platform companies to disclose the collection and utilization of consumer data may inadvertently harm consumer interests and result in unintended consequences. Moreover, we ascertain that when anonymity costs are moderate,  company profits exceed those achieved under the company's transparent personalized pricing strategy when consumer fairness is considered, but as anonymity costs increase, consumer surplus and social welfare tend to decrease. Therefore, while public policy makers advocate for company's transparent personalized pricing strategy, this study research suggests that platform companies should carefully evaluate decisions on transparent personalized pricing strategies, taking into account consumers' anonymity cost and concerns regarding fairness.