Privacy Management in Service Systems

54 Pages Posted: 9 Jul 2020 Last revised: 14 Feb 2022

See all articles by Ming Hu

Ming Hu

University of Toronto - Rotman School of Management

Ruslan Momot

University of Michigan, Stephen M. Ross School of Business

Jianfu Wang

City University of Hong Kong

Date Written: June 16, 2020

Abstract

Problem definition: We study customer-centric privacy management in service systems and explore the consequences of extended control over personal information by customers in such systems.

Methodology: We adopt a stylized queueing model to capture a service environment that features a service provider and customers who are strategic in deciding whether to disclose personal information to the service provider---that is, customers' privacy or information disclosure strategy. A customer's service request can be one of two types, which affects service time but is unknown when customers commit to a privacy strategy. The service provider can discriminate among customers, based on their disclosed information, by offering different priorities.

Results: Our analysis reveals that, when given control over their personal data, strategic customers do not always choose to withhold it. We find that control over information gives customers a tool they can use to hedge against the service provider's will, which might not be aligned with the interests of customers. More importantly, we find that under certain conditions, giving customers full control over information (e.g., by introducing a privacy regulation) can not only distort already efficiently operating service system but might also backfire by leading to inferior system performance (i.e., longer average wait time) and hurt customers themselves. We demonstrate how a regulator can correct information disclosure inefficiencies through monetary incentives to customers and show that providing such incentives makes economic sense in some scenarios. Finally, the service provider itself can benefit from customers being in control of their personal information by enticing more customers joining the service.

Managerial implications: Our findings yield insights into how customers' individually rational actions concerning information disclosure (e.g., granted by a privacy regulation) can lead to market inefficiencies in the form of longer wait times for services. We provide actionable prescriptions, for both service providers and regulators, that can guide their choices of a privacy and information management approach based on giving customers the option of controlling their personal information.

Keywords: queues: priority, queuing economics, privacy management, service operations

JEL Classification: A12, C02, C70, C60, D11, D18, D21, D62, D63, D70, D80, L51, L80, L90, M15, M20, M11

Suggested Citation

Hu, Ming and Momot, Ruslan and Wang, Jianfu, Privacy Management in Service Systems (June 16, 2020). Available at SSRN: https://ssrn.com/abstract=3628751 or http://dx.doi.org/10.2139/ssrn.3628751

Ming Hu

University of Toronto - Rotman School of Management ( email )

105 St. George st
Toronto, ON M5S 3E6
Canada
416-946-5207 (Phone)

HOME PAGE: http://ming.hu

Ruslan Momot (Contact Author)

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States

HOME PAGE: http://www.ruslanmomot.info

Jianfu Wang

City University of Hong Kong ( email )

Kowloon
Hong Kong
Hong Kong

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
337
Abstract Views
1,719
rank
131,352
PlumX Metrics