Privacy Management in Service Systems

48 Pages Posted: 9 Jul 2020

See all articles by Ming Hu

Ming Hu

University of Toronto - Rotman School of Management

Ruslan Momot

HEC Paris

Jianfu Wang

City University of Hong Kong

Date Written: June 16, 2020

Abstract

We study customer-centric privacy management in service systems and explore the consequences of extended control over personal information by customers in such systems. Our stylized model of a service environment 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. Our analysis yields three sets of main insights. First, 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 incentives, which might not be aligned with the interests of customers. Second, a customer's self-centered strategic decision may or may not be aligned with what is best for customers themselves. In fact, giving customers full control over information might backfire by leading to inferior system performance (i.e., longer average wait time) and hurting 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. Our findings shed light on the market for pricing personal information in the service industry.

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)

HEC Paris ( email )

1, rue de la Liberation
Jouy en Josas, 78351
France

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

Jianfu Wang

City University of Hong Kong ( email )

Kowloon
Hong Kong
Hong Kong

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