Abstract
This paper develops a theoretical model consisting of a single platform and two heterogeneous consumer types to examine the interaction among consumer authorization, platform privacy protection, and discriminatory pricing. After obtaining consumers' authorization to use their data, the platform identifies consumer types and simultaneously determines the level of privacy protection and the discriminatory surcharge, while consumers choose between authorized and non-authorized purchasing options according to their utilities. These choices generate two internal demand structures, which are connected by an authorized-demand composition adjustment state. The results show that the two sets of structure-specific optimal decisions cannot simultaneously satisfy their corresponding demand conditions under the same parameter configuration. After incorporating demand-structure consistency, the platform’s optimal privacy protection level and discriminatory surcharge initially remain unchanged and subsequently decline as low-type consumers’ product valuation increases. The implementable-profit comparison shows that the first demand region is more profitable when low-type consumers’ valuation is relatively low, whereas the second demand region becomes more profitable when their valuation is sufficiently high. Within the intermediate range, the profit bounds of the two demand regions coincide at the adjustment point. Numerical analysis further shows that changes in the base price and privacy-management cost alter the valuation thresholds and operating ranges but do not change the main transition mechanism.
Keywords:
- Keyword: consumer authorization; privacy protection; discriminatory pricing; platform pricing decisions; demand structure
How to Cite:
Shen, P., Li, Z. & Espahbod, S., (2026) “Consumer Privacy and Differential Pricing on Digital Platforms: A Comparative Institutional Analysis”, Journal of Intelligent and Sustainable Systems (JISS) 2(2).