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Pricing and quality decisions in a supply chain with consumers' privacy concern

  • *Corresponding author: Rui Hou

    *Corresponding author: Rui Hou
Abstract Full Text(HTML) Figure(7) / Table(3) Related Papers Cited by
  • This study considers a supply chain consists of one manufacturer produces a product with a quality level and sells it through one retailer. A stylized model is developed to investigate the impacts of consumers' privacy concerns on pricing, quality decisions, and profitability through the relationship between product quality and personal information. When consumers' privacy concern is considered, the product quality level, the wholesale price, the payoffs of the manufacturer and retailer, and consumer surplus decrease with the personal information loss, whereas the selling price increases if this loss is low. Our results also show that the retailer prefers to charge a high selling price if the information benefit and the personal information loss are low, or the information benefit is relatively high. Moreover, a "win-win-win" outcome can be achieved among the manufacturer, retailer, and consumers if the personal information loss is sufficiently low. In the case of quality-differentiated products, however, although the manufacturer improves the product quality level, the wholesale prices are increased if the information benefit and the personal information loss are low, or the information benefit is high.

    Mathematics Subject Classification: Primary: 91A40, 91A80; Secondary: 90B06.


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  • Figure 1.  Under Armour HOVR Phantom

    Figure 2.  Supply chain structure

    Figure 3.  Impacts of consumers privacy concern on firms' payoff and consumer surplus

    Figure 4.  Firms' payoff and consumer surplus with general information benefit form

    Figure 5.  Under Armour HOVR Sonic shoes

    Figure 6.  Supply chain structure

    Figure 7.  Impacts of consumers privacy concern on firms' payoff and consumer surplus in a vertically-differentiated supply chain

    Table 1.  Comparison among this paper and representative literatures

    Literatures multi Quality Privacy Supply chain
    products decision concern management
    [31] No Yes No No
    [40, 36] No Yes No Yes
    [20, 6, 22] No No Yes No
    [7] No Yes Yes No
    [43] Yes Yes No No
    This paper Yes Yes Yes yes
     | Show Table
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    Table 2.  Notations

    Super(sub)scripts Explanation
    S consumers share personal information
    N consumers not share personal information
    H high-quality product
    L low-quality product
    Parameters Explanation
    $ \theta $ willingness to pay for product quality, $ \theta \sim U[0,1] $
    $ b $ information benefit coefficient from product quality, $ b \in (0,1) $
    $ c $ consumers' personal information loss, $ c > 0 $
    $ X $ binary decision parameter for consumers's data sharing, $ X=0,1 $
    Decision Variables Explanation
    $ p $ product's selling price
    $ q $ product's quality level
    $ w $ product's wholesale price
    $ \pi_{M} $ payoff of the manufacturer
    $ \pi_{R} $ payoff of the retailer
    $ CS $ consumer surplus
     | Show Table
    DownLoad: CSV

    Table 3.  The improvement of our work

    Our work [7]
    Utility function $ U_{i}=\theta q_{i}-p_{i}+(b q_{i}^{k}-c)X $, $ i=H,L $ $ U=\theta q-p+b q^{k}X $
    objective function $ \pi_{R,i}^{N}=(p_{i}-w_{i})D_{i}^{N} $, $ i=H,L $ $ \pi_{R}=\int_{0}^{\bar{\theta}}P(\theta)d\theta+\int_{\bar{\theta}}^{1}P d\theta+\int_{\overline{\theta}}^{1}Pd\theta-C(q) $
    objective function $ \pi_{M,i}^{N}=(w_{i}-q_{i}^2)D_{i}^{N} $, $ i=H,L $ None
     | Show Table
    DownLoad: CSV
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