User information control and its strategic implications for information strategies in digital businesses

Abstract

With the advancement of technologies like cloud computing and artificial intelligence, digital businesses increasingly collect user information to provide personalized services and sell this information to third parties. However, the emergence of privacy-preserving allows users to control their personal information to minimize privacy losses. This paper investigates how competing digital businesses invest in user information collection and set information pricing, and whether they should allow users to opt out of personal information tracking or even control information authorization. We develop a game-theoretic model to examine the impact of user information control on the information strategies of competing digital businesses. In this model, digital businesses compete for user information and third-party market share, while users balance trade-offs between information control, privacy concerns, and the benefits of information sharing. We find that when users cannot opt out of personal information tracking, digital businesses engage in intense competition for both information collection and pricing, particularly when privacy concerns are low. Conversely, when users can opt out, higher privacy concerns amplify the information advantage of high-level digital businesses, increasing competition and widening disparities in information collection level. Moreover, when privacy concerns are low and the marginal value of user information is high, introducing user information authorization models can expand the information market, boosting the profits of digital businesses. In this case, user control over personal information may reduce consumer surplus. When some anonymous users prohibit information tracking, the presence of double homing users leads the high-level digital business to reduce its information collection.