Consumer Privacy and Retail Platform Operations

Posted: 31 Aug 2021

See all articles by Xiaoyu Wang

Xiaoyu Wang

Washington University in St. Louis - John M. Olin Business School

Fasheng Xu

Syracuse University - Whitman School of Management

Fuqiang Zhang

Washington University in St. Louis - John M. Olin Business School

Date Written: August 26, 2021

Abstract

Exploitation of the individual-level data allows online retail platforms to provide tailored services to con-sumers (e.g., personalized recommendations and search engines update), but at the risk of causing unintended privacy issues (e.g., data breaches and identity theft). This has led to public discussions on whether to protect consumer privacy by restricting the collection and usage of information by platforms. In this paper we study the welfare implications of newly adopted data privacy policies such as the GDPR (General Data Protection Regulation) on different parties in a retail platform setting (including the platform, the upstream supplier, and the downstream consumers). Our analysis yields several main insights. First, we find that the GDPR may hurt the consumer surplus under some conditions, which is the opposite of the desired outcome, while the platform may benefit from it. Second, the GDPR might even lead to a triple-lose situation for the platform, the supplier, and the consumers. Third, we show that under a centralized supply chain (vertical integration of supplier and platform) or agency selling model, the GDPR always enhances the social welfare, but it may either increase or decrease the consumer surplus.

Keywords: GDPR, consumer privacy, personal data, data regulation, data rights, platform operations

Suggested Citation

Wang, Xiaoyu and Xu, Fasheng and Zhang, Fuqiang, Consumer Privacy and Retail Platform Operations (August 26, 2021). Available at SSRN: https://ssrn.com/abstract=3912642

Xiaoyu Wang

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States

Fasheng Xu (Contact Author)

Syracuse University - Whitman School of Management ( email )

721 University Avenue
Syracuse, NY 13244-2130
United States

HOME PAGE: http://www.fashengxu.com

Fuqiang Zhang

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States

HOME PAGE: http://www.olin.wustl.edu/faculty/zhang/

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