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An Experimental Study on the Consumer's Personal Information Protection and Advertising Strategy of the Firm

WANG Min-da;LI Jian-biao;CHEN Zhi-bin;School of Economics and Management,Southeast University;School of Economics and Institution of Brain-Like Economics,Shandong University;China Academy of Corporate Governance and Binhai College,Nankai University;  
In digital era consumers' personal information protection is attracting much attention, meanwhile, many topics such as the strategies of many agents as well as the social welfare distribution under alternative personal information protection levels are still worth further study. In the experimental market, consumer personal information protection is divided into exogenous settings and self-selection settings. Under the exogenous setting, firms directly can or cannot obtain consumers' personal information at all. Under the self-selection setting, consumers decide the degree of personal information protection. The firm could decide the truthfulness level of its advertisement and also make recommendation to consumers in distinctive settings. If the consumer's personal information is protected, then the firm can't know the consumer's personal information and it will report its characters honestly most of the time. The consumer's optimal strategy would be making purchase decision based on the firm's advertisement.If the consumer's personal information isn't protected, then only the firms which averse lying to a high enough extent will send truthful advertisement, thus the consumers can't tell out the honest firm and selfish firm and will be deceived. The consumer's welfare will suffer loss. Therefore, personal information protection benefits consumers and then the consumers are willing to pay appropriate cost to protect their personal information after concerning the cost of personal information protection. When the firms could make recommendations, because the recommendation may need more precise personal information and could benefit consumers, the consumers will lower the personal information protection level as well as their demand, but accept the recommendations which are in consistent with their preference. Therefore, in the future the type-relied personal information protection should be conducted, the fake advertisement and leakage of personal information should be sanctioned more severely, and the cost of consumer's personal information protection should be lower.
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