Personalized Pricing in the Presence of Privacy Concerns

Zhiqi Chen, Mengyu Zhang

Published Online · 2026-05-11 · DOI: 10.1287/mnsc.2024.07170

We study firms' incentives to adopt a tracking technology to collect personal data that enable personalized pricing in an online market where some consumers have innate desires for privacy. In a model where two differentiated goods are sold under two different market structures (monopoly and duopoly), we find that the presence of these privacy-sensitive consumers alters the firms' incentive to adopt personalized pricing. Privacy regulation that gives consumers control over whether a firm can track their online activities has the intended impact of protecting consumer privacy only if the proportion of privacy-sensitive consumers is low.