Abstract: We investigate the effects of consumer privacy concerns on the pricing and personal data collection strategy of an online platform. The online platform derives revenues from disclosing consumer information to firms. Firms compete for the information in order to enable them to price discriminate and thus derive revenues from consumer purchases. A novel aspect of our research is that we allow the online platform to sell only a subset of consumer data. We develop analytical models where consumers can/cannot protect their privacy. Our analysis yields three main conclusions. First, in the monopoly case, we find that when the consumer privacy disclosure aversion cost is relatively low, it is optimal for the platform to sell all consumer information to the firm. Second, in the duopoly case, we illustrate that when the consumer privacy disclosure aversion cost is relatively low, the platform will sell all consumer information to only one firm; when the cost is moderate, the platform will choose to sell the information of only some consumers and to only one firm; when the cost is relatively high, the platform will select only some of the consumers and sell their information to both firms. Third, it will be better for the platform to provide the information protection service for free when the privacy cost is low.

Key words: Price discrimination, User privacy, Consumer information, Two-sided market, Privacy disclosure aversion cost