IDEAS home Printed from https://ideas.repec.org/a/wly/mgtdec/v43y2022i6p2619-2635.html
   My bibliography  Save this article

Information security investment and purchase decision for personalized products

Author

Listed:
  • Lu Xu
  • Yanhui Li
  • Qi Yao

Abstract

Considering information security and personalization paradoxes, this paper investigates the optimal information security investments of a firm and purchasing decisions of consumers with different privacy concerns in online personalization. It is found that consumers and firm tend to fall into a prisoner's dilemma in Nash equilibrium. To improve security investment efficiency and boost personalization consumption, firm‐led Stackelberg game and firm‐led Stackelberg game with punishment mechanism are proposed and analyzed. The results indicate that the security information measures firm take in advance can effectively increase the waverers' willingness to purchase personalized products. Government punishment helps to facilitate a win‐win situation but does not work when proportion of wavers in the market is very small. Furthermore, the responses of equilibrium strategies and payoffs to related characteristics are discussed numerically. Finally, some managerial insights are recommended to firms who provide personalized products for making proper security investment and to government departments for formulating security punishment policies.

Suggested Citation

  • Lu Xu & Yanhui Li & Qi Yao, 2022. "Information security investment and purchase decision for personalized products," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(6), pages 2619-2635, September.
    • Handle: RePEc:wly:mgtdec:v:43:y:2022:i:6:p:2619-2635
    DOI: 10.1002/mde.3551
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/mde.3551
    Download Restriction: no
    File URL: https://libkey.io/10.1002/mde.3551?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Huang, C. Derrick & Behara, Ravi S., 2013. "Economics of information security investment in the case of concurrent heterogeneous attacks with budget constraints," International Journal of Production Economics, Elsevier, vol. 141(1), pages 255-268.
    2. Irina Baye & Irina Hasnas, 2017. "Consumer flexibility, data quality and location choice," Journal of Economics, Springer, vol. 120(2), pages 135-169, March.
    3. Alexander Osharin & Valery Verbus, 2018. "Heterogeneity of consumer preferences and trade patterns in a monopolistically competitive setting," Journal of Economics, Springer, vol. 125(3), pages 211-237, November.
    4. Xinbao Liu & Xiaofei Qian & Jun Pei & Panos M. Pardalos, 2018. "Security investment and information sharing in the market of complementary firms: impact of complementarity degree and industry size," Journal of Global Optimization, Springer, vol. 70(2), pages 413-436, February.
    5. Clark, Kenneth & Sefton, Martin, 2001. "The Sequential Prisoner's Dilemma: Evidence on Reciprocation," Economic Journal, Royal Economic Society, vol. 111(468), pages 51-68, January.
    6. Anna Nagurney & Patrizia Daniele & Shivani Shukla, 2017. "A supply chain network game theory model of cybersecurity investments with nonlinear budget constraints," Annals of Operations Research, Springer, vol. 248(1), pages 405-427, January.
    7. Brocas, Isabelle & Carrillo, Juan D. & Sachdeva, Ashish, 2018. "The path to equilibrium in sequential and simultaneous games: A mousetracking study," Journal of Economic Theory, Elsevier, vol. 178(C), pages 246-274.
    8. Niladri B. Syam & Ranran Ruan & James D. Hess, 2005. "Customized Products: A Competitive Analysis," Marketing Science, INFORMS, vol. 24(4), pages 569-584, February.
    9. Mary J. Culnan & Pamela K. Armstrong, 1999. "Information Privacy Concerns, Procedural Fairness, and Impersonal Trust: An Empirical Investigation," Organization Science, INFORMS, vol. 10(1), pages 104-115, February.
    10. Jurui Zhang & Yong Liu & Yubo Chen, 2015. "Social Learning in Networks of Friends versus Strangers," Marketing Science, INFORMS, vol. 34(4), pages 573-589, July.
    11. Jai, Tun-Min (Catherine) & King, Nancy J., 2016. "Privacy versus reward: Do loyalty programs increase consumers' willingness to share personal information with third-party advertisers and data brokers?," Journal of Retailing and Consumer Services, Elsevier, vol. 28(C), pages 296-303.
    12. Lee, Jongkuk & Palekar, Udatta S. & Qualls, William, 2011. "Supply chain efficiency and security: Coordination for collaborative investment in technology," European Journal of Operational Research, Elsevier, vol. 210(3), pages 568-578, May.
    13. Vidyanand Choudhary & Anindya Ghose & Tridas Mukhopadhyay & Uday Rajan, 2005. "Personalized Pricing and Quality Differentiation," Management Science, INFORMS, vol. 51(7), pages 1120-1130, July.
    14. Tamara Dinev & Paul Hart, 2006. "An Extended Privacy Calculus Model for E-Commerce Transactions," Information Systems Research, INFORMS, vol. 17(1), pages 61-80, March.
    15. Kjell Hausken, 2006. "Returns to information security investment: The effect of alternative information security breach functions on optimal investment and sensitivity to vulnerability," Information Systems Frontiers, Springer, vol. 8(5), pages 338-349, December.
    16. Simon, Jay & Omar, Ayman, 2020. "Cybersecurity investments in the supply chain: Coordination and a strategic attacker," European Journal of Operational Research, Elsevier, vol. 282(1), pages 161-171.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Pallant, Jason I. & Pallant, Jessica L. & Sands, Sean J. & Ferraro, Carla R. & Afifi, Eslam, 2022. "When and how consumers are willing to exchange data with retailers: An exploratory segmentation," Journal of Retailing and Consumer Services, Elsevier, vol. 64(C).
    2. Shuilin Liu & Xudong Lin & Xiaoli Huang & Hanyang Luo & Sumin Yu, 2023. "Research on Service-Driven Benign Market with Platform Subsidy Strategy," Mathematics, MDPI, vol. 11(2), pages 1-21, January.
    3. Morlok, Tina & Matt, Christian & Hess, Thomas, 2017. "Privatheitsforschung in den Wirtschaftswissenschaften: Entwicklung, Stand und Perspektiven," Working Papers 1/2017, University of Munich, Munich School of Management, Institute for Information Systems and New Media.
    4. Anna Priester & Thomas Robbert & Stefan Roth, 2020. "A special price just for you: effects of personalized dynamic pricing on consumer fairness perceptions," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 19(2), pages 99-112, April.
    5. Paul, Jomon A. & Zhang, Minjiao, 2021. "Decision support model for cybersecurity risk planning: A two-stage stochastic programming framework featuring firms, government, and attacker," European Journal of Operational Research, Elsevier, vol. 291(1), pages 349-364.
    6. Lu Xu & Yanhui Li & Jing Fu, 2019. "Cybersecurity Investment Allocation for a Multi-Branch Firm: Modeling and Optimization," Mathematics, MDPI, vol. 7(7), pages 1-20, July.
    7. Xiaofei Qian & Jun Pei & Xinbao Liu & Mi Zhou & Panos M. Pardalos, 2019. "Information security decisions for two firms in a market with different types of customers," Journal of Combinatorial Optimization, Springer, vol. 38(4), pages 1263-1285, November.
    8. Corey Angst, 2009. "Protect My Privacy or Support the Common-Good? Ethical Questions About Electronic Health Information Exchanges," Journal of Business Ethics, Springer, vol. 90(2), pages 169-178, November.
    9. Liu, Yu-li & Wu, Yanfei & Li, Changyan & Song, Chuling & Hsu, Wen-yi, 2024. "Does displaying one's IP location influence users' privacy behavior on social media? Evidence from China's Weibo," Telecommunications Policy, Elsevier, vol. 48(5).
    10. Jabbar, Abdul & Geebren, Ahmed & Hussain, Zahid & Dani, Samir & Ul-Durar, Shajara, 2023. "Investigating individual privacy within CBDC: A privacy calculus perspective," Research in International Business and Finance, Elsevier, vol. 64(C).
    11. Zheyin (Jane) Gu & Giri K. Tayi, 2015. "Research Note—Investigating Firm Strategies on Offering Consumer-Customizable Products," Information Systems Research, INFORMS, vol. 26(2), pages 456-468, June.
    12. Grace Fox & Lisa van der Werff & Pierangelo Rosati & Patricia Takako Endo & Theo Lynn, 2022. "Examining the determinants of acceptance and use of mobile contact tracing applications in Brazil: An extended privacy calculus perspective," Journal of the Association for Information Science & Technology, Association for Information Science & Technology, vol. 73(7), pages 944-967, July.
    13. Renata Benigna Gonçalves & Júlio César Bastos Figueiredo, 2022. "Effects of perceived risks and benefits in the formation of the consumption privacy paradox: a study of the use of wearables in people practicing physical activities," Electronic Markets, Springer;IIM University of St. Gallen, vol. 32(3), pages 1485-1499, September.
    14. Amit Basu & Sreekumar Bhaskaran, 2018. "An Economic Analysis of Customer Co-design," Information Systems Research, INFORMS, vol. 29(4), pages 787-804, December.
    15. Michael Breward & Khaled Hassanein & Milena Head, 2017. "Understanding Consumers’ Attitudes Toward Controversial Information Technologies: A Contextualization Approach," Information Systems Research, INFORMS, vol. 28(4), pages 760-774, December.
    16. Idris Adjerid & Alessandro Acquisti & George Loewenstein, 2019. "Choice Architecture, Framing, and Cascaded Privacy Choices," Management Science, INFORMS, vol. 67(5), pages 2267-2290, May.
    17. Sumeet Gupta & Haejung Yun & Heng Xu & Hee-Woong Kim, 2017. "An exploratory study on mobile banking adoption in Indian metropolitan and urban areas: a scenario-based experiment," Information Technology for Development, Taylor & Francis Journals, vol. 23(1), pages 127-152, January.
    18. Tawfiq Alashoor & Mark Keil & H. Jeff Smith & Allen R. McConnell, 2023. "Too Tired and in Too Good of a Mood to Worry About Privacy: Explaining the Privacy Paradox Through the Lens of Effort Level in Information Processing," Information Systems Research, INFORMS, vol. 34(4), pages 1415-1436, December.
    19. Helia Marreiros & Mirco Tonin & Michael Vlassopoulos & M.C. Schraefel, 2016. "“Now that you mention it”: A Survey Experiment on Information, Salience and Online Privacy," BEMPS - Bozen Economics & Management Paper Series BEMPS34, Faculty of Economics and Management at the Free University of Bozen.
    20. Liu, Yu-li & Yan, Wenjia & Hu, Bo, 2021. "Resistance to facial recognition payment in China: The influence of privacy-related factors," Telecommunications Policy, Elsevier, vol. 45(5).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:mgtdec:v:43:y:2022:i:6:p:2619-2635. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www3.interscience.wiley.com/cgi-bin/jhome/7976 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.