This paper explores the optimal mechanism design for two-way information disclosure between firms and consumers in B2C e-commerce. Firms seek to collect and utilize a wide variety of user data for competitive advantages. Meanwhile, consumers, despite privacy concerns, may also voluntarily consent to data exploitation for price discounts and better assessment of experience goods' value. The awakening public awareness of online privacy and personal data protection regulations has now granted users the initiative to decide how to reveal their data to firms. Using a dynamic mechanism design approach, we investigate the optimal pricing and two-way information disclosure contract design that coordinates data-driven and sales-driven profits for the firm and helps consumers balance their privacy concerns and benefits of information disclosure. Our research provides managerial implications for e-commerce firms in differentiated pricing and creating user privacy policies.


Paper Number 1559; Track Economics; Complete Paper



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