Pricing strategy with customers’ privacy concerns in Smart-X systems

This paper investigates the impact of privacy concerns on customers’ purchasing decisions and service providers’ pricing strategies in Smart-X systems. We develop profit maximisation models to test purchasing decisions and pricing strategies of advanced and basic services in monopoly and competitive markets. We find customers’ privacy costs and service differentiation determine each service provider’s pricing decision and their relative market position. In asymmetrical competition markets, service providers can only coexist when the degree of service differentiation is moderate. These findings have practical implications for the increasingly competitive global markets of specialised products that require pre- and post-purchase services.